-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U58hdJwzMJ7oX9GPFUTWgJjCSBV0lMfp5xVYo/oNctzHTCgx0uTflprHpG5UkU6U 0UW041T4g1UvA3vxBOul6Q== 0000744822-98-000013.txt : 19980630 0000744822-98-000013.hdr.sgml : 19980630 ACCESSION NUMBER: 0000744822-98-000013 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980629 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY INVESTMENT TRUST CENTRAL INDEX KEY: 0000744822 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04008 FILM NUMBER: 98655757 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391269 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZH-1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY OVERSEAS FUND DATE OF NAME CHANGE: 19861228 N-30D 1 (2_FIDELITY_LOGOS)FIDELITY'S BROADLY DIVERSIFIED INTERNATIONAL EQUITY FUNDS FIDELITY INTERNATIONAL GROWTH & INCOME FUND FIDELITY DIVERSIFIED INTERNATIONAL FUND FIDELITY INTERNATIONAL VALUE FUND FIDELITY OVERSEAS FUND FIDELITY WORLDWIDE FUND SEMIANNUAL REPORT APRIL 30, 1998 CONTENTS
MARKET RECAP 3 A REVIEW OF WHAT HAPPENED IN WORLD MARKETS DURING THE LAST SIX MONTHS. INTERNATIONAL GROWTH & INCOME FUND 4 PERFORMANCE 5 FUND TALK: THE MANAGER'S OVERVIEW 7 INVESTMENT CHANGES 8 INVESTMENTS 13 FINANCIAL STATEMENTS DIVERSIFIED INTERNATIONAL FUND 15 PERFORMANCE 16 FUND TALK: THE MANAGER'S OVERVIEW 18 INVESTMENT CHANGES 19 INVESTMENTS 26 FINANCIAL STATEMENTS INTERNATIONAL VALUE FUND 28 PERFORMANCE 29 FUND TALK: THE MANAGER'S OVERVIEW 31 INVESTMENT CHANGES 32 INVESTMENTS 37 FINANCIAL STATEMENTS OVERSEAS FUND 39 PERFORMANCE 40 FUND TALK: THE MANAGER'S OVERVIEW 42 INVESTMENT CHANGES 43 INVESTMENTS 48 FINANCIAL STATEMENTS WORLDWIDE FUND 50 PERFORMANCE 51 FUND TALK: THE MANAGER'S OVERVIEW 53 INVESTMENT CHANGES 54 INVESTMENTS 57 FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS 59 NOTES TO THE FINANCIAL STATEMENTS
To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. MARKET RECAP During the six-month period that ended April 30, 1998, some of the world's financial markets enjoyed robust growth, while others continued to unravel. Most European markets benefited from strong economies and low interest rates, while many Asian markets continued to writhe under the increasing pressures of currency devaluations, economic instability, and civil and political unrest. For the period, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index returned 15.56%. EUROPE: Most economies in Europe continued to thrive amidst an environment of relatively benign inflation and reduced interest rates, as many countries began to prepare for the advent of the European Monetary Union in January 1999. Many corporations followed the path to efficiency through restructuring and robust merger and acquisition activity. In addition, the stronger U.S. dollar made European exports more attractive. The MSCI Europe Index returned an impressive 29.24% during the period. Strong individual performers included Portugal, Spain and Italy. However, the strong U.S. dollar took back some of the gains for dollar-based investors in all European markets, except the United Kingdom. EMERGING MARKETS: Latin American markets struggled as the economic turmoil in Southeast Asia prompted a massive sell-off of most emerging-market stocks at the beginning of the period. The Brazilian market rebounded and performed fairly well during the period after interest rates quickly fell from a high point of more than 40% in late fall 1997. However, Mexico and Venezuela - two major exporters of oil - - were victims of the plummeting price of oil at the end of 1997, which widened their trade gaps and eventually put pressure on their currencies. The MSCI Emerging Markets Free - Latin America Index returned 7.97% during the period. Southeast Asian markets - the origin of most of the volatility in emerging markets - performed poorly. The depreciation of many currencies in the region prompted central banks to dramatically raise interest rates, which had a slowing effect on the economies by making borrowing more expensive. The MSCI Far East ex-Japan Free Index fell 11.87% during the period. The Southeast Asian crisis also caused volatility in U.S. markets by introducing the threat of cheapening Asian imports. JAPAN AND THE FAR EAST: Japan suffered from sharply falling stock prices and depreciating currencies relative to the U.S. dollar. In addition, the failure of several Japanese financial firms raised concerns about widespread corporate bankruptcies throughout the country. The Tokyo Stock Exchange Index - a gauge of the Japanese market - was down 12.44% over the past six months. Although the Hong Kong market did suffer from the influence of currency problems in Southeast Asia at the beginning of the period, the market recovered in early 1998 and fared significantly better than other Asian markets because of its more mature and less volatile nature. The Hang Seng Index, which measures the performance of the Hong Kong stock market, dropped 0.64% during the period. U.S. AND CANADA: Despite economic difficulties in Southeast Asia and the resulting concern that U.S. corporate earnings would slow, the U.S. stock market continued to perform well during the period. In fact, the Standard & Poor's 500 Index - a measure of the U.S. stock market - returned 22.49% during this time. Some U.S. corporations with business exposure to Asia did report disappointing earnings and their stocks were harshly punished - sometimes sending the market tumbling for a day or two. However, investors seemed to adopt a new attitude - one that overlooked short-term troubles and focused on longer-term growth - helping many of these stocks to rebound quickly. Overall, the continued strength of the U.S. economy, combined with low interest rates and low inflation, buoyed the stock market. Through the first four months of 1998, cash inflows into stock mutual funds were very strong and the Dow Jones Industrial Average closed above 9000 for the first time in April. Canada's stock market also generated healthy returns - to the point that share prices were often outpacing corporate profits, causing equity valuations to hit historic highs. In addition, Canada has improved its economy and the unemployment rate dropped from double digits a year ago to about 8.5% during the period. The Toronto Stock Exchange 300 was up 11.13% for the six-month period. BONDS: Although bond markets couldn't keep pace with global equity markets, some bonds generated relatively strong gains. U.S.-based bonds topped most foreign bonds on the continued strength of the U.S. dollar and a backdrop of benign inflation. Convertible bonds - issues that are convertible into a fixed number of a company's common shares - - outperformed most other types of bonds, particularly government bonds, since they were more tied to the strength of regional equity markets. And, despite the turbulence created in many markets by the Southeast Asian crisis, the J.P. Morgan Emerging Markets Bond Index still managed to return 14.56% for the period. The Salomon Brothers Non-U.S. World Government Bond Index - a proxy for developed countries - - fell 1.02% for the period. S&P 500 EAFE * YEAR TO DATE THROUGH APRIL 30, 1998. Row: 1, Col: 1, Value: nil Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: 6.1 Row: 2, Col: 2, Value: 7.38 Row: 3, Col: 1, Value: 31.57 Row: 3, Col: 2, Value: 56.16 Row: 4, Col: 1, Value: 18.56 Row: 4, Col: 2, Value: 69.44000000000001 Row: 5, Col: 1, Value: 5.1 Row: 5, Col: 2, Value: 24.63 Row: 6, Col: 1, Value: 16.61 Row: 6, Col: 2, Value: 28.27 Row: 7, Col: 1, Value: 31.69 Row: 7, Col: 2, Value: 10.53 Row: 8, Col: 1, Value: -3.1 Row: 8, Col: 2, Value: -23.45 Row: 9, Col: 1, Value: 30.47 Row: 9, Col: 2, Value: 12.13 Row: 10, Col: 1, Value: 7.619999999999999 Row: 10, Col: 2, Value: -12.17 Row: 11, Col: 1, Value: 10.08 Row: 11, Col: 2, Value: 32.56 Row: 12, Col: 1, Value: 1.32 Row: 12, Col: 2, Value: 7.78 Row: 13, Col: 1, Value: 37.58 Row: 13, Col: 2, Value: 11.21 Row: 14, Col: 1, Value: 22.96 Row: 14, Col: 2, Value: 6.05 Row: 15, Col: 1, Value: 32.11 Row: 15, Col: 2, Value: 4.819999999999999 Row: 16, Col: 1, Value: 15.1 Row: 16, Col: 2, Value: 15.7 % INTERNATIONAL GROWTH & INCOME PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 APRIL 30, 1998 MONTHS YEAR YEARS YEARS FIDELITY INTL GROWTH & INCOME 15.27% 22.48% 73.75% 154.03% MSCI EAFE 15.56% 19.17% 62.18% 81.79% JP MORGAN GLOBAL GOVT BOND 1.20% 8.82% 37.84% 118.92% INTERNATIONAL FUNDS AVERAGE 16.25% 20.89% 80.98% 168.95% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index - a market capitalization weighted, unmanaged index of over 1,000 foreign stocks. You can also compare the fund's performance to the J.P. Morgan Global Government Bond Index - a broad measure of bond performance in developed countries including the United States. To measure how the fund's performance stacked up against its peers, you can compare it to the international funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 503 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 APRIL 30, 1998 YEAR YEARS YEARS FIDELITY INTL GROWTH & INCOME 22.48% 11.68% 9.77% MSCI EAFE 19.17% 10.15% 6.16% JP MORGAN GLOBAL GOVT BOND 8.82% 6.63% 8.15% INTERNATIONAL FUNDS AVERAGE 20.89% 12.41% 10.01% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Int'l Growth & Income MS EAFE Index (Net) JP Global Bond Index 00305 MS001 JP002 1988/04/30 10000.00 10000.00 10000.00 1988/05/31 9870.80 9679.44 9892.49 1988/06/30 9758.83 9424.31 9804.35 1988/07/31 9758.83 9719.98 9728.28 1988/08/31 9276.49 9088.00 9659.30 1988/09/30 9612.40 9485.10 9899.96 1988/10/31 10172.27 10296.67 10289.80 1988/11/30 10353.14 10910.00 10380.79 1988/12/31 10329.97 10970.83 10318.29 1989/01/31 10522.73 11163.85 10216.19 1989/02/28 10557.78 11221.24 10199.39 1989/03/31 10557.78 11001.01 10113.01 1989/04/30 10820.63 11103.04 10279.58 1989/05/31 10513.97 10499.00 10168.43 1989/06/30 10549.02 10322.26 10399.66 1989/07/31 11547.84 11618.46 10813.77 1989/08/31 11390.13 11095.93 10493.80 1989/09/30 11845.74 11601.37 10659.78 1989/10/31 11276.23 11135.26 10796.87 1989/11/30 11696.79 11695.02 10892.97 1989/12/31 12305.18 12126.54 11020.14 1990/01/31 12092.41 11675.33 10855.73 1990/02/28 11666.87 10860.45 10738.50 1990/03/31 11658.01 9729.05 10672.56 1990/04/30 11631.41 9651.84 10630.79 1990/05/31 12384.97 10753.13 10970.71 1990/06/30 12775.05 10658.42 11169.21 1990/07/31 13369.03 10808.55 11497.33 1990/08/31 12225.39 9758.95 11407.71 1990/09/30 11046.30 8398.90 11514.43 1990/10/31 12154.47 9707.61 11969.42 1990/11/30 11879.64 9134.97 12180.11 1990/12/31 11908.01 9282.96 12315.62 1991/01/31 12329.37 9583.21 12595.00 1991/02/28 13025.53 10610.52 12607.29 1991/03/31 12558.37 9973.55 12189.54 1991/04/30 12750.73 10071.49 12360.83 1991/05/31 12732.41 10176.58 12371.44 1991/06/30 12118.69 9428.80 12206.25 1991/07/31 12540.05 9892.05 12464.30 1991/08/31 12494.25 9691.16 12723.34 1991/09/30 12897.29 10237.35 13187.27 1991/10/31 12814.85 10382.47 13317.58 1991/11/30 12457.61 9897.77 13534.46 1991/12/31 12865.15 10408.92 14218.41 1992/01/31 12846.60 10186.59 13939.92 1992/02/29 12865.15 9821.99 13899.33 1992/03/31 12447.75 9173.58 13770.99 1992/04/30 12995.01 9217.19 13885.58 1992/05/31 13579.37 9834.14 14279.93 1992/06/30 13449.51 9367.69 14669.37 1992/07/31 13013.56 9127.94 14992.58 1992/08/31 13245.45 9700.45 15391.46 1992/09/30 13022.84 9508.89 15376.52 1992/10/31 12327.17 9010.11 14992.48 1992/11/30 12299.35 9094.90 14726.66 1992/12/31 12435.34 9141.94 14865.81 1993/01/31 12549.34 9140.81 15117.87 1993/02/28 12891.33 9416.93 15361.48 1993/03/31 13850.82 10237.76 15597.53 1993/04/30 14620.31 11209.35 15881.53 1993/05/31 14962.31 11446.09 15987.46 1993/06/30 14762.81 11267.51 15995.72 1993/07/31 15256.80 11661.92 16002.20 1993/08/31 16054.79 12291.47 16475.86 1993/09/30 15950.29 12014.80 16650.09 1993/10/31 16387.29 12385.07 16641.54 1993/11/30 15826.79 11302.48 16520.08 1993/12/31 16797.66 12118.60 16689.30 1994/01/31 17677.22 13143.17 16846.73 1994/02/28 17361.72 13106.77 16661.69 1994/03/31 16434.36 12542.24 16585.33 1994/04/30 16654.25 13074.40 16572.07 1994/05/31 16960.19 12999.34 16435.08 1994/06/30 16549.09 13183.04 16630.24 1994/07/31 16826.34 13309.82 16786.78 1994/08/31 16988.87 13624.94 16743.64 1994/09/30 16596.89 13195.81 16826.39 1994/10/31 16768.98 13635.23 17078.06 1994/11/30 16252.71 12979.92 16863.14 1994/12/31 16315.34 13061.20 16902.35 1995/01/31 15762.61 12559.44 17244.23 1995/02/28 15871.19 12523.40 17688.90 1995/03/31 16779.24 13304.50 18588.65 1995/04/30 17085.21 13804.86 18885.03 1995/05/31 16868.07 13640.30 19411.86 1995/06/30 16907.55 13401.09 19533.12 1995/07/31 17904.44 14235.39 19625.79 1995/08/31 17697.16 13692.36 19080.30 1995/09/30 17825.47 13959.78 19510.22 1995/10/31 17598.46 13584.54 19700.77 1995/11/30 17864.95 13962.51 19920.40 1995/12/31 18311.10 14525.06 20167.06 1996/01/31 18362.10 14584.69 19960.10 1996/02/29 18321.30 14634.00 19843.75 1996/03/31 18627.33 14944.77 19813.19 1996/04/30 19096.59 15379.26 19739.88 1996/05/31 19116.99 15096.25 19760.03 1996/06/30 19249.60 15181.22 19932.78 1996/07/31 18800.75 14737.51 20299.62 1996/08/31 19035.38 14769.80 20384.14 1996/09/30 19494.43 15162.17 20496.46 1996/10/31 19474.03 15007.02 20903.10 1996/11/30 20443.14 15604.12 21201.34 1996/12/31 20634.23 15403.40 21062.69 1997/01/31 20475.91 14867.36 20527.31 1997/02/28 20718.67 15114.15 20385.41 1997/03/31 20718.67 15171.59 20230.34 1997/04/30 20739.78 15255.03 20116.45 1997/05/31 21774.13 16250.73 20591.19 1997/06/30 22734.60 17149.39 20825.27 1997/07/31 23315.10 17429.28 20748.72 1997/08/31 21911.34 16129.93 20723.17 1997/09/30 23315.10 17035.95 21183.26 1997/10/31 22037.99 15730.82 21632.26 1997/11/30 21953.56 15573.51 21372.63 1997/12/31 22103.89 15712.27 21349.24 1998/01/31 22305.85 16433.78 21563.66 1998/02/28 23528.86 17491.29 21723.55 1998/03/31 24785.53 18033.17 21560.32 1998/04/30 25402.64 18178.88 21891.59 IMATRL PRASUN SHR__CHT 19980430 19980514 111512 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity International Growth & Income Fund on April 30, 1988. As the chart shows, by April 30, 1998, the value of the investment would have grown to $25,403 - a 154.03% increase on the initial investment. For comparison, look at how both the Morgan Stanley Capital International EAFE Index and the J.P. Morgan Global Government Bond Index did over the same period. With dividends and capital gains, if any, reinvested in each, the same $10,000 would have grown to $18,179 - a 81.79% increase and $21,892 - a 118.92% increase, respectively. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) INTERNATIONAL GROWTH & INCOME FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Effective May 1, 1998 - after the period covered by this report - Bill Bower became Portfolio Manager of Fidelity International Growth & Income Fund. Q. BILL, HOW DID THE FUND PERFORM? A. Fairly well. For the six-month and one-year periods that ended April 30, 1998, the fund posted returns of 15.27% and 22.48%, respectively. By comparison, the international funds average, as tracked by Lipper Analytical Services, was up 16.25% and 20.89% over the same two periods. Because the fund invests in both equities and bonds, we also compare it to two separate indexes to evaluate its performance. The Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index - which measures equity returns - was up 15.56% over the six-month period and 19.17% over the one-year period. For the same two time periods, the J.P. Morgan Global Government Bond Index - which tracks the performance of government bonds in 13 developed countries including the U.S. - returned 1.20% and 8.82%, respectively. Q. WHY DID THE FUND SLIGHTLY UNDERPERFORM ITS PEER GROUP OVER THE PAST SIX MONTHS? A. Because, unlike most of its peers, the fund was required to invest at least 25% of its assets in debt securities. Over the past six months, bonds dramatically underperformed equities, which did extremely well. Considering the disparity between the performance of stocks and bonds, the fact that the fund kept up with its peer group to the extent that it did indicates that the stocks and bonds the fund held performed quite well. In fact, comparing just apples to apples, the equity portion of the fund notably outperformed the EAFE index over the period. Likewise, the fund's bond holdings dramatically beat the bond index. Q. WHY DID EQUITIES SO SIGNIFICANTLY OUTPERFORM BONDS OVER THIS MOST RECENT SIX-MONTH PERIOD? A. There were several reasons why equities did well, and they applied mostly to the very strong European markets, where the fund was largely focused during this period. First, many European companies continued to make significant structural changes. These changes - including improving management structure and cutting costs - really paid off in company profitability over the past six months. In addition, a number of major European companies merged over the period. Lastly, European central banks took steps toward finalizing European monetary union over the period. I should emphasize that the disparity between equities and bonds wasn't a result of bonds being poor performers, but of equities - mostly those in Europe - being outstanding performers. Q. HOW DID STEPS TAKEN TOWARD THE UPCOMING MONETARY UNION BOOST EQUITY PERFORMANCE? A. As European countries begin to convert to one currency and one monetary policy, they are all expected to move toward the goal of one interest rate. This is expected to result in interest rates moving closer to those in Germany, where the Bundesbank attempts to keep interest rates low. This is especially good news for geographically peripheral European countries, such as Spain, Italy and Ireland, which have historically had higher interest rates than Germany and are already beginning to see the impact of monetary union. As Europe moves toward monetary union, we are beginning to see lower interest rates throughout the entire continent. Obviously, these lower rates have been a tremendous positive for equity valuations because they lower corporate borrowing costs. Q. DESPITE A STRONG EUROPEAN EQUITY MARKET, YOU NOTED THE FUND'S BOND COMPONENT DID WELL COMPARED TO THE BONDS THAT WERE PART OF THE BOND INDEX. WHICH OF THE FUND'S BOND HOLDINGS LOOKED STRONG OVER THE PERIOD? A. Convertible bonds - which are convertible into a fixed number of shares of a company's common stock - were the best performers and definitely outperformed government bonds. In addition, the fund's government bonds solidly beat the government bonds in the index. I attribute this to the fund's overall bond strategy of being underweighted versus the index in poor-performing Japan and overweighted in the U.K. and U.S, both of which did well. Q. COMING BACK TO EQUITIES, WHAT WERE SOME OF THE STANDOUT PERFORMERS? A. As I've implied, most of them were European companies. Top-10 holding Telefonica de Espana, a Spanish telephone utility that the fund has owned on and off for five years, took off over the past six months. It was helped by a very strong Spanish stock market and declining interest rates. French defense electronics company Alcatel Alsthom was another top-10 holding that skyrocketed during the period. It continued to be an excellent example of how a company can improve its profitability by restructuring. Another factor that boosted the performance of a number of the fund's top holdings - especially number-one holding, Credit Suisse, as well as Dresdner Bank and Societe Generale - was the continued success of the financial sector. This sector - which made up more than 21% of the fund at the end of the period - turned in a strong performance for several reasons. Q. WHAT WERE THOSE REASONS? A. First, there was a trend toward consolidation in the banking industry that gave the sector a boost. The financial sector also benefited from a decline in interest rates. That's because when interest rates drop, financial stocks usually rise. Lastly, European banks began to benefit from steps they had taken to set up mutual funds and other financial services. This began to pay off as Europeans started to realize - as Americans did several years ago - that their governments' social security systems weren't as viable as they thought and that they, as individuals, would need to take more action to save adequately for retirement. Q. DID ANY OF THE FUND'S HOLDINGS TURN IN DISAPPOINTING RESULTS OVER THE PERIOD? A. Yes. One of the fund's top holdings, Honda, turned in flat performance for most of the past six months. Japan's performance in general was very disappointing because its economy remained so weak. Q. BILL, HOW DOES THE MARKET LOOK GOING FORWARD? A. Overall, Europe continues to look strong even though there is some risk of a market correction. In terms of Asia, it looks like there will be some inexpensive buying opportunities going forward. In Japan, the fund will continue to look for signs of change mostly at a company-specific level. However, if the government takes action to cut taxes and get the economy growing, Japan could look like a good investment area. That said, I would like to emphasize that the fund selects its equities on a stock-by-stock basis. It does not invest based on country fundamentals. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. BILL BOWER ON CHANGES TO THE FUND APPROVED BY THE FUND'S BOARD OF TRUSTEES IN MAY: "On May 14, 1998, the fund's Board of Trustees voted to eliminate the investment policy requiring the fund to invest at least 25% of its total assets in debt securities under normal conditions. This policy change will be effective July 1, 1998. "As of July 1, Fidelity will invest a majority of the fund's assets in equity securities, with a focus on those that pay current dividends and show potential for capital appreciation. The fund can continue to invest in bonds but will not have a minimum required investment. Eliminating the minimum debt policy makes the fund's policies more similar to Fidelity's successful domestic growth and income funds. "I should make it clear that the weak performance of bonds compared to equities over the past six months did not precipitate this policy change. "When the minimum debt policy was adopted in 1988, foreign stocks had very low yields. So, the fund invested in stocks primarily for capital appreciation and invested in bonds to seek income. In recent years, the yields on foreign stocks have increased relative to U.S. yields. Fidelity believes that eliminating the minimum debt policy will allow the fund greater flexibility in meeting its investment objectives of capital growth and current income." (solid bullet) Bill Bower's investment style will continue to be "bottom-up" - or focused on finding the best individual stocks - and heavily research-driven. He looks for companies that are in steady, stable businesses or that have competitive advantages in their industries. And, like the previous fund manager, he tends to have low company turnover and an investment horizon of one to three years. FUND FACTS GOAL: growth of capital and current income by investing mainly in foreign stocks FUND NUMBER: 305 TRADING SYMBOL: FIGRX START DATE: December 31, 1986 SIZE: As of April 30, 1998, more than $1.0 billion MANAGER: Bill Bower, since May, 1998; manager, Fidelity Select Construction & Housing Portfolio, 1994-1996; international equity analyst, 1996-1998; joined Fidelity in 1994 (checkmark) INTERNATIONAL GROWTH & INCOME INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 10.8% FRANCE 10.4% ROW: 1, COL: 1, VALUE: 10.4 ROW: 1, COL: 2, VALUE: 9.6 ROW: 1, COL: 3, VALUE: 5.4 ROW: 1, COL: 4, VALUE: 11.8 ROW: 1, COL: 5, VALUE: 4.3 ROW: 1, COL: 6, VALUE: 20.7 ROW: 1, COL: 7, VALUE: 3.2 ROW: 1, COL: 8, VALUE: 5.1 ROW: 1, COL: 9, VALUE: 18.7 ROW: 1, COL: 10, VALUE: 10.8 GERMANY 9.6% UNITED KINGDOM 18.7% ITALY 5.4% JAPAN 11.8% SWEDEN 5.1% SPAIN 3.2% NETHERLANDS 4.3% OTHER 20.7% AS OF OCTOBER 31, 1997 FRANCE 8.7% UNITED STATES 14.4% ROW: 1, COL: 1, VALUE: 8.699999999999999 ROW: 1, COL: 2, VALUE: 7.8 ROW: 1, COL: 3, VALUE: 4.7 ROW: 1, COL: 4, VALUE: 15.1 ROW: 1, COL: 5, VALUE: 3.7 ROW: 1, COL: 6, VALUE: 19.3 ROW: 1, COL: 7, VALUE: 3.1 ROW: 1, COL: 8, VALUE: 4.2 ROW: 1, COL: 9, VALUE: 19.0 ROW: 1, COL: 10, VALUE: 14.4 GERMANY 7.8% UNITED KINGDOM 19.0% ITALY 4.7% JAPAN 15.1% SWEDEN 4.2% NETHERLANDS 3.7% SPAIN 3.1% OTHER 19.3% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 71.3 66.0 BONDS 5.3 5.8 GOVERNMENT OBLIGATIONS 16.7 17.4 SHORT-TERM INVESTMENTS 6.7 10.8 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO CREDIT SUISSE GROUP (REG.) 1.4 0.5 (SWITZERLAND, BANKS) NATIONALE ELF AQUITAINE 1.3 1.2 (FRANCE, OIL & GAS) VODAFONE GROUP PLC 1.2 0.7 (UNITED KINGDOM, CELLULAR) DRESDNER BANK AG ORD. 1.2 0.4 (GERMANY, BANKS) SOCIETE GENERALE CLASS A 1.1 0.9 (FRANCE, BANKS) ALCATEL ALSTHOM COMPAGNIE GENERALE 1.0 D'ELECTRICITE SA 1.1 (FRANCE, ELECTRICAL EQUIPMENT) HONDA MOTOR CO. LTD. 1.1 1.0 (JAPAN, AUTOS, TIRES, & ACCESSORIES) TELEFONICA DE ESPANA SA ORD. 1.1 0.7 (SPAIN, TELEPHONE SERVICES) AKZO NOBEL NV 1.0 0.8 (NETHERLANDS, CHEMICALS & PLASTICS) DAIMLER-BENZ AG ORD. 1.0 0.6 (GERMANY, AUTOS, TIRES, & ACCESSORIES) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 21.1 17.8 DURABLES 9.4 7.4 UTILITIES 7.9 7.5 BASIC INDUSTRIES 7.2 6.7 NONDURABLES 4.4 3.3 ENERGY 3.9 4.6 CONSTRUCTION & REAL ESTATE 3.6 4.6 TECHNOLOGY 3.4 4.3 INDUSTRIAL MACHINERY & EQUIPMENT 3.4 3.6 HEALTH 2.8 3.7 INTERNATIONAL GROWTH & INCOME INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 70.3% SHARES VALUE (NOTE 1) ARGENTINA - 0.9% Banco de Galicia Y Buenos Aires SA sponsored ADR representing Class B shares 54,758 $ 1,341,571 Bansud SA Class B (a) 140,000 1,316,165 Telecom Argentina Class B sponsored ADR 80,000 2,880,000 YPF Sociedad Anonima sponsored ADR representing Class D shares 91,000 3,173,625 8,711,361 AUSTRALIA - 1.7% Australia & New Zealand Banking Group Ltd. 257,500 1,791,277 Brambles Industries Ltd. 145,000 2,979,013 Fosters Brewing Group Ltd. 645,000 1,400,187 National Mutual Holdings Ltd. (f) 407,000 960,243 Normandy Mining Ltd. 1,850,000 2,056,117 QNI Ltd. 3,257,700 1,905,608 Sons of Gwalia NL 665,000 2,044,385 Telstra Corp. Ltd. (h) 451,000 1,055,259 Western Mining Holdings Ltd. 875,000 3,105,136 17,297,225 AUSTRIA - 0.4% KTM-Motorradholding AG (f) 15,500 1,037,790 Mayr Melnhof Karton AG 50,000 3,467,809 4,505,599 BELGIUM - 0.2% Credit Communal Holding/Dexia (f) 16,000 2,189,474 BRAZIL - 0.9% Aracruz Celulose SA ADR 310,000 4,882,500 Petrobras PN (Pfd. Reg.) 15,100,000 3,829,304 8,711,804 CANADA - 2.8% Agrium, Inc. 1,950 30,184 Barrick Gold Corp. 105,000 2,351,759 CGI Group, Inc. Class A (sub. vtg.) (a) 122,200 3,364,674 Cinar Films, Inc. Class B (sub. vtg.) (a) 96,000 1,844,928 Common Development International Ltd. (a)(f) 54,000 962,298 Domtar, Inc. 595,800 4,996,401 Hudson's Bay Co. Ord. 83,900 1,823,467 Hudson's Bay Co. (i) 146,000 1,326,392 JDS Fitel, Inc. (a) 213,600 3,985,548 Kinross Gold Corp. (a) 530,400 2,427,842 National Bank of Canada 255,400 5,265,243 ThermicEdge Corp. 195 127 Westaim Corp. 1,946 14,415 28,393,278 CHILE - 0.1% Supermercados Unimarc SA sponsored ADR 93,400 1,009,888 DENMARK - 1.3% Novo-Nordisk AS Class B 30,000 4,861,882 Unidanmark AS Class A 100,000 8,395,141 13,257,023 FINLAND - 1.3% Cultor OY Ord., Series 2 35,000 2,073,551 Finnair OY 500,000 5,135,730 SHARES VALUE (NOTE 1) Rauma OY 2,784 $ 52,085 UPM-Kymmene Corp. 200,000 5,997,799 13,259,165 FRANCE - 8.7% Alcatel Alsthom Compagnie Generale d'Electricite SA 62,900 11,400,625 Axa SA 60,000 7,037,129 Cap Gemini Sogeti SA 22,400 2,906,288 Christian Dior SA 15,500 2,098,596 Compagnie Generale de Geophysique SA (a) 15,000 2,177,922 LVMH (Moet-Hennessy Louis Vuitton) sponsored ADR 35,000 7,198,272 Michelin SA (Compagnie Generale des Etablissements) Class B 130,000 8,182,906 Nationale Elf Aquitaine 100,000 13,107,401 Peugeot SA Ord. 50,000 8,671,817 Renault SA: Partners Certificates 4,700 1,912,950 Ord. (a) 160,000 7,415,898 Societe Generale Class A 55,000 11,439,488 Total SA sponsored ADR 90,294 5,304,773 88,854,065 GRAND CAYMAN - 0.0% Apex Silver Mines Ltd. 82,800 967,725 GERMANY - 5.1% Daimler-Benz AG Ord. 100,000 9,903,113 Deutsche Lufthansa AG 200,000 4,733,003 Dresdner Bank AG Ord. 210,000 11,728,381 Hoechst AG Ord. 165,000 6,668,356 Mannesmann AG Ord. 4,500 3,723,481 Merck KGAA 55,000 2,174,397 Metallgesellschaft AG Ord. 90,000 1,931,399 Pfleiderer AG 92,000 1,885,183 Philipp Holzmann AG (a) 16,500 4,942,926 Puma AG 70,000 1,695,529 Schmalbach-Lubeca AG 8,000 2,004,566 51,390,334 HONG KONG - 1.6% China Telecom (Hong Kong) Ltd. 1,836,000 3,545,775 Dairy Farm International Holdings Ltd. 2,767,000 3,541,760 Dah Sing Financial Holdings Ltd. 1,000,000 2,439,182 Johnson Electric Holdings Ltd. 1,336,800 4,528,748 National Mutual Asia Ltd. 3,052,000 2,442,073 Sun Hung Kai & Co. Ltd. 1,000 110 Sun Hung Kai & Co. Ltd. warrants 2/28/00 (a) 200 5 16,497,653 INDONESIA - 0.4% Astra International PT 9,500,000 1,870,313 PT Bank International Indonesia 3,096,285 212,870 PT Bank International Indonesia warrants 1/17/00 (a) 453,002 9,456 PT Asuransi Lippo Life (a) 2,043,000 102,150 PT Telekom 1,351,000 531,956 Sampoerna, Hanjaya Mandala 1,800,000 1,175,625 3,902,370 IRELAND - 0.3% Irish Life PLC 380,000 3,523,717 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ITALY - 3.1% Assicurazioni Generali Spa 190,000 $ 5,687,031 Credito Italiano Ord. 1,500,000 7,846,546 Ericsson SPA 9,500 604,147 Istituto Bancario San Paolo 200,000 2,934,274 Telecom Italia Spa 1,122,220 8,449,099 Telecom Italia Mobile Spa 310,000 1,774,827 Toro Assicurazioni Spa Ord. 150,000 2,623,414 Unicem SPA 149,101 1,535,509 31,454,847 JAPAN - 9.8% Acom Co. Ltd. 95,000 4,999,435 Advantest Corp. 28,600 1,916,356 Fuji Photo Film Co. Ltd. 100,000 3,546,019 Fujitsu Ltd. 277,000 3,222,021 Hitachi Maxell Ltd. 200,000 3,794,466 Honda Motor Co. Ltd. 301,000 10,877,470 Kokusai Electric Co. Ltd. 210,000 1,778,656 Long Term Credit Bank of Japan Ltd. (The) 1,439,000 2,350,935 Mabuchi Motor Co. 40,000 2,306,795 Matsushita Electric Industrial Co. Ltd. 371,000 5,921,475 Minebea Co. Ltd. 418,000 4,657,557 Mitsubishi Estate Co. Ltd. 147,000 1,416,601 Nintendo Co. Ltd. Ord. 28,600 2,613,996 Nitto Denko Corp. 200,000 3,041,596 Nomura Securities Co. Ltd. 150,000 1,823,828 Omron Corp. 100,000 1,562,206 Orix Corp. 47,900 3,299,718 Ricoh Co. Ltd. Ord. 250,000 2,580,463 Sakura Bank Ltd. 452,000 1,548,353 Sakura Finance Bermuda Trust: sponsored ADR (f) 35 1,493,367 unit (Reg.) 22 872,050 Sankyo Co. Ltd. 191,000 4,716,582 Shin-Etsu Chemical Co. Ltd. 2,000 38,848 Shin-Etsu Chemical Co. Ltd. warrants 8/15/00 (a) 280 437,500 Sony Corp. 100,000 8,495,348 Sumitomo Realty & Development Co. Ltd. 260,000 1,242,989 Takeda Chemical Industries Ltd. 235,000 6,687,747 Takefuji Corp. 43,000 2,249,953 THK Co. Ltd. 45,000 430,265 Tokio Marine & Fire Insurance Co. Ltd. (The) 203,000 2,200,790 Tokyo Electron Ltd. 50,000 1,957,463 Uni Charm Corp. Ord. 121,000 4,554,865 Yasuda Trust & Banking 1,057,000 1,408,537 100,044,250 MALAYSIA - 0.2% Arab Malaysian Corp. BHD 320,000 123,456 AMMB Holdings BHD 98,000 99,247 Berjaya Sports Toto BHD 700,000 1,659,746 Tenega Nasional BHD 1,000 1,996 1,884,445 MEXICO - 1.1% Consorcio G Grupo Dina SA de CV sponsored ADR (a) 432,900 2,245,669 DESC (Sociedad de Fomento Industrial SA) Class B 209,000 1,452,073 Grupo Financiero Bancomer Class B 7,200,000 4,968,441 Grupo Financiero Inbursa SA Class B 979,000 2,985,881 11,652,064 SHARES VALUE (NOTE 1) NETHERLANDS - 3.3% AKZO Nobel NV 50,300 $ 10,224,690 EVC International NV 30,000 586,082 ING Groep NV 100,000 6,464,217 Koninklijke KNP BT NV 90,000 2,470,449 Royal Dutch Petroleum Co. Ord. 90,000 5,090,624 Royal Ptt Nederland NV 80,000 4,130,768 Unilever NV Ord. 58,000 4,125,031 33,091,861 NORWAY - 0.7% Det Sondenfjelds-Norske Dampskibselskab, Class A 120,000 2,957,209 Smedvig AS: Series A 76,800 1,625,179 Series B 19,200 385,723 SAS Norske ASA Shares B 150,000 2,501,172 7,469,283 PERU - 0.3% Compania de Minas Buenaventura SA Class B sponsored ADR 175,000 2,712,500 PHILIPPINES - 0.0% Empire East Land, Inc. (a) 1,668,500 25,701 Guoco Holdings Philippines, Inc. 645,000 16,986 42,687 PORTUGAL - 0.8% Electricidade de Portugal SA 147,000 3,832,908 Portugal Telecom SA 85,000 4,564,208 8,397,116 RUSSIA - 0.3% Vimpel Communications sponsored ADR (a) 65,700 3,547,800 SINGAPORE - 0.2% Keppel Bank 1,200,000 1,561,099 Kim Engineering Holdings Ltd. 20,000 7,326 1,568,425 SOUTH AFRICA - 0.4% Anglo American Corp. of South Africa Ltd. (Reg.) 50,000 2,958,346 Sasol, Ltd. 112,100 1,131,315 4,089,661 SPAIN - 3.2% Banco Bilbao Vizcaya SA Ord. (Reg.) 105,000 5,397,856 Corporacion Mapfre Compania Internacional de Reaseguros SA (Reg.) 120,000 4,705,419 Dragados y Construcciones SA 225,000 7,288,286 Telefonica de Espana SA Ord. 260,000 10,842,923 Vallehermoso SA 100,000 3,868,726 32,103,210 SWEDEN - 4.2% Astra AB Class A Free shares 315,000 6,457,914 Ericsson (L.M.) Telephone Co. Class B 25,000 1,285,788 Electrolux AB 50,000 4,641,807 Mo Och Domsjoe AB Class B 200,000 6,189,076 Nordbanken Holding AB 520,000 3,821,755 Svenska Cellulosa AB (SCA) Class B Ord. 90,000 2,587,808 Svenska Handelsbanken 150,000 6,788,643 Swedish Match Co. 890,000 3,075,455 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SWEDEN - CONTINUED Volvo AB: Class B 199,500 $ 5,934,436 ADR Class B 50,000 1,487,500 42,270,182 SWITZERLAND - 2.5% Credit Suisse Group (Reg.) 63,400 13,935,922 Nestle SA (Reg.) 2,400 4,651,968 SIG AG (Reg.) 5,000 4,156,398 Sulzer AG (Reg.) 3,500 2,506,161 25,250,449 UNITED KINGDOM - 14.2% Albright & Wilson PLC 1,525,000 4,433,468 BBA Group PLC 450,000 3,695,392 Bank of Scotland 465,000 5,710,377 Berkeley Group PLC 265,000 3,404,840 Biocompatibles International PLC Class L (a) 125,000 317,452 British Petroleum PLC Ord. 3,268 51,571 British Borneo Petroleum 275,000 1,596,658 British Telecommunications PLC Ord. 430,000 4,662,702 Cable & Wireless PLC Ord. 505,000 5,779,715 Cadbury-Schweppes PLC Ord. 175,000 2,549,641 Carlton Communications PLC 700,000 6,262,994 Commercial Union PLC 260,000 4,861,026 De la Rue PLC 300,000 1,436,053 Diageo PLC 337,816 4,018,692 Dixons Group PLC 370,000 3,529,899 English China Clay PLC 600,000 2,471,113 General Electric PLC Class L 670,000 5,541,208 Greenalls Group PLC 300,000 2,420,989 HSBC Holdings PLC Ord. 100,000 3,152,800 Iceland Group PLC 2,099,900 7,806,441 Inchcape PLC Ord. 650,600 2,432,213 Ladbroke Group PLC Ord. 998,983 5,487,169 Legal & General Group Ltd. Ord. 550,000 6,588,800 Lloyds TSB Group PLC 115,000 1,720,632 National Westminster Bank PLC Ord. 340,000 6,799,822 Pearson, PLC 236,000 3,694,673 Pilkington PLC Ord. 2,300,000 4,822,764 RMC Industries, Inc. 225,000 3,947,265 Rio Tinto PLC (Reg.) 335,000 4,805,179 Royal & Sun Alliance Insurance Group PLC 478,209 5,337,264 Sedgwick Group PLC 850,000 2,187,077 Tarmac PLC 2,500,000 4,834,878 Tomkins PLC Ord. 700,000 4,116,851 United Biscuits Holdings PLC Class L 500,000 2,071,792 Vodafone Group PLC 1,080,000 11,819,239 144,368,649 UNITED STATES OF AMERICA - 0.3% Getchell Gold Corp. (a) 110,000 2,708,750 TOTAL COMMON STOCKS (Cost $528,089,673) 715,126,860 PREFERRED STOCKS - 1.0% SHARES VALUE (NOTE 1) CONVERTIBLE PREFERRED STOCKS - 0.2% JAPAN - 0.1% AJL participating trust $1.44 PEPS 117,100 $ 1,061,219 UNITED KINGDOM - 0.1% Iceland Group PLC 5 1/2% 400,000 1,161,206 TOTAL CONVERTIBLE PREFERRED STOCKS 2,222,425 NONCONVERTIBLE PREFERRED STOCKS - 0.8% ITALY - 0.8% Italmobiliare Spa 90,000 1,665,292 Telecom Italia Spa 1,195,000 6,296,252 7,961,544 TOTAL PREFERRED STOCKS (Cost $7,071,904) 10,183,969 CORPORATE BONDS - 5.3% MOODY'S RATINGS PRINCIPAL (UNAUDITED) (E) AMOUNT (C) CONVERTIBLE BONDS - 4.5% CHINA (PEOPLES REPUBLIC) - 0.1% Qingling Motors Ltd. 3 1/2%, 1/22/02 (f) - $ 1,800,000 1,368,000 HONG KONG - 0.3% Cosco Treasury Co. Ltd. 1%, 3/13/03 (f) - 698,000 636,053 Shanghai Investment Holdings Ltd. 1%, 6/12/02 (f) - 2,000,000 1,925,000 2,561,053 INDONESIA - 0.2% APP Global Finance Ltd. 2%, 7/25/00 (Reg.) - 2,250,000 2,328,750 JAPAN - 1.6% Asahi Breweries Ltd 6.40%, 10/16/98 - JPY 306,000,000 3,593,902 Hitachi Ltd. 1.70%, 3/29/02 Aa2 JPY 159,000,000 1,352,682 MBL International Finance of Bermuda 3%, 11/30/02 Aa2 3,830,000 3,916,175 Matsushita Electric Works Co. Ltd. 2.70%, 5/31/02 - JPY 81,000,000 795,822 STB CayMan Capital Ltd. 1/2%, 10/1/07 (f) Baa2 JPY 235,000,000 1,530,397 Sony Corp. 0.15%, 3/30/01 Aa3 JPY 100,000,000 1,277,621 Sumitomo Bank International Finance NV: 3/4%, 5/31/01 (Reg.) A2 JPY 123,000,000 951,496 3/4%, 5/31/01 (f) A2 JPY 62,000,000 479,616 Takeda Chemical Industries Ltd. 1.90%, 9/30/98 - JPY 200,000,000 2,589,874 16,487,585 CORPORATE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (E) AMOUNT (C) (NOTE 1) CONVERTIBLE BONDS - CONTINUED MEXICO - 0.2% Alfa SA de CV 8%, 9/15/00 (f) - $ 1,900,000 $ 2,265,750 NETHERLANDS - 1.0% Bilbao Vizcaya Investments 3 1/2%, 7/12/06 Aa3 2,500,000 7,925,000 Volkswagen AG 3%, 1/24/02 (f) A1 1,100,000 1,732,500 9,657,500 SWITZERLAND - 0.3% Sandoz Capital BVI Ltd. 2%, 10/6/02 - 2,200,000 3,388,000 THAILAND - 0.2% Bangkok Bank PCL euro 3 1/4%, 3/3/04 (f) - 3,830,000 1,742,650 UNITED STATES OF AMERICA - 0.6% Global TeleSystems Group, Inc. 8 3/4%, 6/30/00 (f) - 3,000,000 6,382,500 TOTAL CONVERTIBLE BONDS 46,181,788 NONCONVERTIBLE BONDS - 0.8% JAPAN - 0.3% Sony Corp. 1.40%, 3/31/05 Aa3 JPY 220,000,000 2,381,781 LUXEMBOURG - 0.5% Daimler-Benz Capital AG 4 1/8%, 7/5/03 unit A1 DEM 5,750,000 5,402,932 TOTAL NONCONVERTIBLE BONDS 7,784,713 TOTAL CORPORATE BONDS (Cost $47,033,332) 53,966,501 GOVERNMENT OBLIGATIONS (G) - 16.7% DENMARK - 0.5% Danish Kingdom Bullet 8%, 5 /15/03 Aaa DKK 29,000,000 4,795,509 FRANCE - 1.7% French Government: 4 3/4%, 4/12/99 Aaa FRF 20,000,000 3,347,454 6 3/4%, 10/25/04 Aaa FRF 50,000,000 9,191,793 OAT 7 1/4%, 4/25/06 Aaa FRF 25,000,000 4,788,188 17,327,435 GERMANY - 4.5% German Federal Republic: 5 3/4%, 8/22/00 Aaa DEM 17,000,000 9,767,025 6%, 1/4/07 Aaa DEM 25,000,000 14,892,255 6 1/4%, 1/4/24 Aaa DEM 5,500,000 3,373,991 Treuhandanstalt 6 5/8%, 7/9/03 Aaa DEM 30,000,000 18,161,364 46,194,635 MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (E) AMOUNT (C) (NOTE 1) ITALY - 1.5% Italian Government 12%, 9/1/01 (d) Aa3 ITL 22,000,000 $ 15,070,462 SWEDEN - 0.9% Swedish Government 13%, 6/15/01 Aa1 SEK 60,000,000 9,478,261 UNITED KINGDOM - 4.4% United Kingdom, Great Britain & Northern Ireland: 9 3/4%, 8/27/02 Aaa GBP 9,500,000 18,027,798 9%, 7/12/11 Aaa GBP 4,000,000 8,597,830 9%, 8/6/12 Aaa GBP 8,200,000 17,803,234 44,428,862 UNITED STATES OF AMERICA - 3.2% U.S. Treasury Obligations: 7 3/4%, 12/31/99 Aaa 22,000,000 22,746,020 6 5/8% 5/15/07 Aaa 3,000,000 3,180,930 6 7/8%, 8/15/25 Aaa 6,000,000 6,668,460 32,595,410 TOTAL GOVERNMENT OBLIGATIONS (Cost $166,602,261) 169,890,574 CASH EQUIVALENTS - 6.7% SHARES Taxable Central Cash Fund (Cost $67,882,960) (b) 67,882,960 67,882,960 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $816,680,130) $1,017,050,864 SECURITY TYPE ABBREVIATIONS PEPS - Participating Equity Preferred Shares/Premium Exchangeable Participating Shares CURRENCY ABBREVIATIONS AUD - Australian dollar CAD - Canadian dollar DKK - Danish krone FRF - French franc DEM - German deutsche mark GBP - British pound ITL - Italian lira JPY - Japanese yen SEK - Swedish krona LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Principal amount is stated in United States dollars unless otherwise noted. (d) Principal amount in thousands. (e) Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $24,705,638 or 2.4% of net assets. (g) For foreign government obligations not individually rated by S&P or Moody's, the ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. (h) Purchased on installment basis. Market value reflects only those payments made through 11/17/97. The remaining installment aggregating AUD 608,850 is due on 11/17/98. (i) Purchased on installment basis. Market value reflects only those payments made through 9/26/97. The remaining installment aggregating CAD 2,737,500 is due on 10/2/98. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $326,374,168 and $441,933,552, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $8,392 for the period (see Note 4 of Notes to Financial Statements). The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 19.2% AAA, AA, A 18.3% Baa 0.2% BBB 0.3% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% For some foreign government obligations, FMR has assigned the ratings of the sovereign credit of the issuing government. The percentage not rated by Moody's or S&P amounted to 2.7%. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Basic Industries 7.2% Cash Equivalents 6.7 Construction & Real Estate 3.6 Durables 9.4 Energy 3.9 Finance 21.1 Government Obligations 16.7 Health 2.8 Holding Companies 0.3 Industrial Machinery & Equipment 3.4 Media & Leisure 2.2 Nondurables 4.4 Precious Metals 2.1 Retail & Wholesale 2.2 Services 0.8 Technology 3.4 Transportation 1.9 Utilities 7.9 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $816,810,182. Net unrealized appreciation aggregated $200,240,682, of which $234,347,662 related to appreciated investment securities and $34,106,980 related to depreciated investment securities. INTERNATIONAL GROWTH & INCOME FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 1,017,050,864 (COST $816,680,130) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 471,072 RECEIVABLE FOR FUND SHARES SOLD 5,811,381 DIVIDENDS RECEIVABLE 3,799,921 INTEREST RECEIVABLE 5,514,940 OTHER RECEIVABLES 9,626 TOTAL ASSETS 1,032,657,804 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 429 PAYABLE FOR FUND SHARES REDEEMED 5,553,859 ACCRUED MANAGEMENT FEE 626,655 OTHER PAYABLES AND 521,064 ACCRUED EXPENSES TOTAL LIABILITIES 6,702,007 NET ASSETS $ 1,025,955,797 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 790,995,447 UNDISTRIBUTED NET INVESTMENT INCOME 4,992,233 ACCUMULATED UNDISTRIBUTED 29,724,950 NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 200,243,167 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 45,318,412 $ 1,025,955,797 SHARES OUTSTANDING NET ASSET VALUE, OFFERING PRICE $22.64 AND REDEMPTION PRICE PER SHARE ($1,025,955,797 (DIVIDED BY) 45,318,412 SHARES)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 7,621,750 DIVIDENDS INTEREST 8,966,656 16,588,406 LESS FOREIGN TAXES WITHHELD (749,508) TOTAL INCOME 15,838,898 EXPENSES MANAGEMENT FEE $ 3,770,855 TRANSFER AGENT FEES 1,413,123 ACCOUNTING FEES AND EXPENSES 289,655 NON-INTERESTED TRUSTEES' COMPENSATION 1,852 CUSTODIAN FEES AND EXPENSES 317,945 REGISTRATION FEES 56,262 AUDIT 28,438 LEGAL 3,041 REPORTS TO SHAREHOLDERS 73,645 MISCELLANEOUS 19,440 TOTAL EXPENSES BEFORE REDUCTIONS 5,974,256 EXPENSE REDUCTIONS (124,841) 5,849,415 NET INVESTMENT INCOME 9,989,483 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 29,995,805 FOREIGN CURRENCY TRANSACTIONS 25,386 30,021,191 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 105,019,687 ASSETS AND LIABILITIES IN (221,431) 104,798,256 FOREIGN CURRENCIES NET GAIN (LOSS) 134,819,447 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 144,808,930 OTHER INFORMATION $ 82,178 EXPENSE REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 663 TRANSFER AGENT CREDITS 42,000 $ 124,841
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 9,989,483 $ 25,418,358 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 30,021,191 73,243,116 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 104,798,256 33,690,453 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 144,808,930 132,351,927 DISTRIBUTIONS TO SHAREHOLDERS (18,064,435) (15,358,151) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (42,969,496) (19,594,396) TOTAL DISTRIBUTIONS (61,033,931) (34,952,547) SHARE TRANSACTIONS 601,289,282 1,459,910,318 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 59,413,586 34,047,249 COST OF SHARES REDEEMED (785,691,098) (1,531,263,569) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (124,988,230) (37,306,002) TOTAL INCREASE (DECREASE) IN NET ASSETS (41,213,231) 60,093,378 NET ASSETS BEGINNING OF PERIOD 1,067,169,028 1,007,075,650 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $4,992,233 AND $22,266,921, RESPECTIVELY) $ 1,025,955,797 $ 1,067,169,028 OTHER INFORMATION SHARES SOLD 29,225,207 70,794,239 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 2,997,659 1,787,246 REDEEMED (38,024,665) (74,210,657) NET INCREASE (DECREASE) (5,801,799) (1,629,172)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 20.88 $ 19.09 $ 17.83 $ 17.54 $ 17.25 $ 13.29 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .20 D .48 D, I .54 .54 .38 D .14 D NET REALIZED AND UNREALIZED GAIN (LOSS) 2.81 1.97 1.32 .28 .02 4.14 TOTAL FROM INVESTMENT OPERATIONS 3.01 2.45 1.86 .82 .40 4.28 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.37) (.29) (.60) (.21) (.03) (.31) FROM NET REALIZED GAIN (.88) (.37) - (.32) (.05) (.01) F IN EXCESS OF NET REALIZED GAIN - - - - (.03) - TOTAL DISTRIBUTIONS (1.25) (.66) (.60) (.53) (.11) (.32) NET ASSET VALUE, END OF PERIOD $ 22.64 $ 20.88 $ 19.09 $ 17.83 $ 17.54 $ 17.25 TOTAL RETURN B, C 15.27% 13.17% 10.66% 4.95% 2.33% 32.94% E RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED)$ 1,025,956 $ 1,067,169 $ 1,007,076 $ 903,235 $ 1,367,938 $ 1,002,847 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.20% A 1.17% 1.16% 1.18% 1.21% 1.52% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.17% A, G 1.15% G 1.14% G 1.18% 1.21% 1.52% EXPENSE REDUCTIONS RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.01% A 2.33% 2.76% 2.98% 2.16% .87% PORTFOLIO TURNOVER RATE 71% A 70% 95% 141% 173% 24% AVERAGE COMMISSION RATE H $ .0032 $ .0068 $ .0065 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E TOTAL RETURN DOES NOT INCLUDE ONE TIME SALES CHARGE. F INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. I INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE.
DIVERSIFIED INTERNATIONAL PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY DIVERSIFIED 17.80% 29.01% 113.89% 125.06% INTERNATIONAL MSCI GDP-WTD EAFE 20.46% 25.72% 78.25% 100.57% INTERNATIONAL FUNDS AVERAGE 16.25% 20.89% 80.98% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on December 27, 1991. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) GDP-Weighted Europe, Australasia, Far East (EAFE) Index - a gross domestic product weighted, unmanaged index of over 1,000 foreign stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the international funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 503 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY DIVERSIFIED INTERNATIONAL 29.01% 16.42% 13.64% MSCI GDP-WTD EAFE 25.72% 12.26% 11.59% INTERNATIONAL FUNDS AVERAGE 20.89% 12.41% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Diversified International MS GDP-Wtd. EAFE (Net) 00325 MS005 1991/12/27 10000.00 10000.00 1991/12/31 10060.00 10196.19 1992/01/31 9860.00 10109.92 1992/02/29 9680.00 9972.49 1992/03/31 9140.00 9481.13 1992/04/30 9240.00 9563.81 1992/05/31 9750.00 10126.93 1992/06/30 9540.00 9797.41 1992/07/31 9190.00 9450.48 1992/08/31 9350.00 9920.65 1992/09/30 9140.00 9556.68 1992/10/31 8460.00 9168.72 1992/11/30 8460.00 9213.47 1992/12/31 8671.06 9211.91 1993/01/31 8873.42 9318.58 1993/02/28 9176.96 9644.58 1993/03/31 9915.57 10303.18 1993/04/30 10522.64 11252.11 1993/05/31 10785.71 11427.99 1993/06/30 10482.17 11230.18 1993/07/31 10805.94 11568.15 1993/08/31 11362.43 12415.92 1993/09/30 11210.66 12155.45 1993/10/31 11453.49 12489.74 1993/11/30 11028.54 11494.70 1993/12/31 11850.64 12303.22 1994/01/31 12739.44 13243.97 1994/02/28 12484.04 13171.27 1994/03/31 12085.61 12982.15 1994/04/30 12320.58 13637.94 1994/05/31 12300.15 13324.95 1994/06/30 12136.69 13319.05 1994/07/31 12555.55 13628.32 1994/08/31 12872.25 13859.17 1994/09/30 12504.47 13371.97 1994/10/31 12729.22 13778.34 1994/11/30 12044.75 13164.27 1994/12/31 11979.79 13264.12 1995/01/31 11428.51 12924.34 1995/02/28 11566.33 12909.67 1995/03/31 12128.21 13494.32 1995/04/30 12509.87 14097.55 1995/05/31 12615.88 13961.27 1995/06/30 12806.71 13805.48 1995/07/31 13633.63 14707.85 1995/08/31 13421.60 14093.61 1995/09/30 13676.04 14260.84 1995/10/31 13495.81 13847.46 1995/11/30 13633.63 14139.27 1995/12/31 14132.55 14744.32 1996/01/31 14555.74 14931.68 1996/02/29 14566.88 14976.23 1996/03/31 14856.44 15174.76 1996/04/30 15391.00 15647.33 1996/05/31 15546.91 15416.27 1996/06/30 15691.69 15537.25 1996/07/31 15190.54 15091.25 1996/08/31 15446.68 15082.83 1996/09/30 15914.43 15497.62 1996/10/31 16014.66 15327.98 1996/11/30 16905.60 15982.90 1996/12/31 16961.57 15869.12 1997/01/31 17076.88 15573.96 1997/02/28 17365.14 15686.25 1997/03/31 17388.20 15988.99 1997/04/30 17445.86 15953.65 1997/05/31 18541.27 16789.15 1997/06/30 19486.78 17792.30 1997/07/31 20040.25 18188.00 1997/08/31 18852.59 16886.29 1997/09/30 20155.56 17974.61 1997/10/31 19106.27 16651.14 1997/11/30 18944.84 16586.70 1997/12/31 19289.47 16831.02 1998/01/31 19851.53 17709.76 1998/02/28 20891.95 18731.79 1998/03/31 21860.61 19756.23 1998/04/30 22506.38 20057.32 IMATRL PRASUN SHR__CHT 19980430 19980506 114243 R00000000000080 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Diversified International Fund on December 27, 1991, when the fund started. As the chart shows, by April 30, 1998, the value of the investment would have grown to $22,506 - a 125.06% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International GDP-weighted EAFE Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $20,057 - a 100.57% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) DIVERSIFIED INTERNATIONAL FUND TALK: THE MANAGER'S OVERVIEW An interview with Greg Fraser, Portfolio Manager of Fidelity Diversified International Fund Q. HOW DID THE FUND PERFORM, GREG? A. For the six-month and one-year periods that ended April 30, 1998, the fund returned 17.80% and 29.01%, respectively. For the same time periods, the Morgan Stanley Capital International GDP-Weighted EAFE Index - a broad measure of stock performance in Europe, Australia and the Far East - was up 20.46% and 25.72%, respectively, while the international funds average was up 16.25% for the past six months and 20.89% for the past year, according to Lipper Analytical Services. Q. WHY DID THE FUND UNDERPERFORM THE INDEX OVER THE PAST SIX MONTHS BUT OUTPERFORM IT OVER THE 12-MONTH PERIOD? A. Over the past six months, I think the fund was hurt somewhat versus the index because it was underweighted in the extremely well- performing Italian market. However, over the past 12 months, it appears that strong stock selection in a variety of markets - especially the very well-performing European markets - boosted the fund's performance. In addition, certain country weightings contributed meaningfully to the fund's performance over the 12-month period. A notable example was the fund's weighting in the poorly performing Japanese market. In that market, the fund benefited from a position that was significantly underweight versus the index. Q. WHAT WERE SOME OF THE EUROPEAN STOCKS THAT PERFORMED WELL OVER THE PAST SIX MONTHS? A. Over that period, many European equities benefited from several economic trends, including lower interest rates, improving economies and beneficial corporate restructuring moves. Some of the best examples were companies that were added to the fund's top-10 holdings over the period. Netherlands'-based consumer electronics company Philips Electronics continued to benefit from corporate restructuring. Telefonica de Espana - a Spanish telephone company that was up dramatically over the period - was boosted by a very favorable market environment that was sparked by decreasing interest rates in Spain. In addition, Credit Suisse and Societe Generale, two large European banks, benefited from an upturn in the banking sector. The financial sector - which made up about 30% of the fund at the end of the period - - benefited from an increase in consolidation and the overall decline in European interest rates. Q. IT SEEMS LIKE THERE WAS A FAIR AMOUNT OF CHANGE IN THE FUND'S TOP-10 HOLDINGS OVER THE PAST SIX MONTHS. WHY WAS THAT? A. There are several important things to consider when you look at the fund's top-10 holdings. First, the computer models that help me to manage the fund rate over 6,000 stocks continuously, so there are a lot of good stocks to choose from in terms of top holdings. Second, as the fund grows, new money is generally added to the most attractive names, and this can cause the fund's weighting in those stocks to increase dramatically. It also means that stocks can sometimes be bumped out of the top 10 even though they remain key holdings for the fund. Q. THERE HAS BEEN A LOT OF PRESS COVERAGE ABOUT MONETARY UNION IN EUROPE. HOW WILL MONETARY UNION AFFECT THE FUND'S EUROPEAN HOLDINGS? A. As shareholders may be aware, many countries in Europe are attempting to adopt a common regional currency - the euro - in place of national currencies. This is a rather complicated topic, and the full ramifications of it are difficult to predict. If the monetary union works as planned, transaction costs for European companies will probably decline, and some European companies will become even more globally competitive. However, there very well could be some unforeseen glitches that - at least temporarily - could cause sharp drops in some stock prices. Q. THE U.S. DOLLAR CONTINUED TO BE QUITE STRONG AGAINST SEVERAL MAJOR WORLD CURRENCIES DURING MUCH OF THIS PERIOD. HOW DID THAT IMPACT THE FUND? A. The fund owns securities that are priced in non-dollar currencies. Thus, a Japanese stock priced in yen will be worth fewer dollars if the dollar rises against the yen. It's possible to sell foreign currencies and remove some of this risk; this process is called hedging. As long-term shareholders know, the fund generally does not hedge currency. So, it's fair to say that, relative to international funds that do hedge, the fund will find a strong-dollar environment more challenging. Over the six-month period, the strong dollar continued to hold back the fund's dollar-based performance relative to funds that hedged, but strong local market returns resulted in satisfactory absolute returns. Q. WHY DOESN'T THE FUND HEDGE ITS CURRENCY EXPOSURE? A. There can be at least a modest cost to hedging, so some returns may be lost if a fund consistently hedges currency. Also, if the international portion of an investor's portfolio aims to provide diversification for a primarily U.S.-based portfolio, it may make sense philosophically to have some non-dollar exposure as well. That's because the dollar may do poorly when U.S. asset prices underperform. Q. WHICH HOLDINGS WERE DISAPPOINTING FOR THE FUND OVER THE PERIOD? A. The stocks that I considered disappointments were primarily in Japan. Generally, smaller and non-export companies there performed quite poorly through the end of 1997, and then rallied sharply in January - a burst of performance that proved short-lived. However, as I noted in the last report to shareholders, many of these companies are extremely attractively priced, so some patience is required. One other notable disappointment was Peregrine Investments in Hong Kong. This company went bankrupt after making a large loan to an Indonesian company. While I had been reducing the fund's position in this stock, I still held some of it when Peregrine went bankrupt. Q. GREG, WHAT'S THE OUTLOOK FOR THE FUND? A. Many markets around the world performed impressively through the end of the period. Because of this strong performance, the valuations of many stocks are increasingly less attractive than they were several years ago. As I mentioned earlier, offsetting these less attractive valuations - at least for many European companies - are lower interest rates, improving economies and beneficial corporate restructuring moves. In Asia, and especially Japan, valuations have become much more reasonable, but the restructuring activities that have contributed to the success of American and European stocks are largely missing. Overall, then, it's a mixed bag: Stocks that have done well tend to be fully priced while stocks that are reasonably valued have debatable business prospects. As in past reports, I want to remind shareholders that investing in foreign equities entails substantial risks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. GREG FRASER ADDRESSES SOME COMMONLY ASKED SHAREHOLDER QUESTIONS: "A shareholder who noticed during the fall of 1997 that international markets moved mostly in sync with the U.S. market on the big down days wrote to ask if international diversification still had any value, since it seemed world market movements had become highly correlated. "It does seem to be true that markets have become more closely correlated for short periods of time. So, on a day-to-day basis, the benefits of international diversification may have declined. However, over longer periods, markets can certainly diverge. "Witness the performance of the Japanese market, which has largely sat out the historic bull market of the 1990s. At some future point, though, the Japanese market may provide positive returns for a sustained period of time, even as other markets falter. The bottom line is that there are probably still some diversification benefits to U.S. holders of international assets. "I also heard from another shareholder who questioned the wisdom of owning securities in a country that he felt was particularly unstable. I'd like to make a couple of points about that statement. First, virtually every country appears to be politically less stable than the United States. When investing in international securities, investors need to appreciate and accept this basic fact. Second, even when countries' governments falter, sometimes the securities in those countries can do quite well. Third, if the price of a security is low enough - in relation to the value - the expected return can be high enough to justify the risk. "To sum up, various risks are an integral part of international investing; however, the fund tries hard to keep risks at acceptable levels." FUND FACTS GOAL: long-term growth of capital by investing mainly in foreign equity securities that are determined, mainly through both quantitative and fundamental analysis, to be undervalued compared to others in their industries and countries FUND NUMBER: 325 TRADING SYMBOL: FDIVX START DATE: December 27, 1991 SIZE: as of April 30, 1998, more than $2.0 billion MANAGER: Greg Fraser, since 1991; manager, Fidelity Select Defense and Aerospace Portfolio, 1989-1990; Fidelity Select Environmental Services Portfolio, 1991; joined Fidelity in 1986 (checkmark) DIVERSIFIED INTERNATIONAL INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 CANADA 5.4% UNITED STATES 5.7% ROW: 1, COL: 1, VALUE: 5.4 ROW: 1, COL: 2, VALUE: 9.1 ROW: 1, COL: 3, VALUE: 6.6 ROW: 1, COL: 4, VALUE: 11.1 ROW: 1, COL: 5, VALUE: 8.300000000000001 ROW: 1, COL: 6, VALUE: 30.7 ROW: 1, COL: 7, VALUE: 5.0 ROW: 1, COL: 8, VALUE: 7.3 ROW: 1, COL: 9, VALUE: 10.8 ROW: 1, COL: 10, VALUE: 5.7 UNITED KINGDOM 10.8% FRANCE 9.1% SWITZERLAND 7.3% GERMANY 6.6% JAPAN 11.1% SWEDEN 5.0% NETHERLANDS 8.3% OTHER 30.7% AS OF OCTOBER 31, 1997 CANADA 8.4% UNITED STATES 11.1% ROW: 1, COL: 1, VALUE: 11.1 ROW: 1, COL: 2, VALUE: 10.1 ROW: 1, COL: 3, VALUE: 4.7 ROW: 1, COL: 4, VALUE: 4.3 ROW: 1, COL: 5, VALUE: 29.9 ROW: 1, COL: 6, VALUE: 4.6 ROW: 1, COL: 7, VALUE: 14.4 ROW: 1, COL: 8, VALUE: 4.5 ROW: 1, COL: 9, VALUE: 8.0 ROW: 1, COL: 10, VALUE: 8.4 FRANCE 8.0% UNITED KINGDOM 10.1% GERMANY 4.5% SWITZERLAND 4.7% SWEDEN 4.3% JAPAN 14.4% OTHER 29.9% NETHERLANDS 4.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS AND CLOSED-END 94.5 90.0 INVESTMENT COMPANIES BONDS 1.1 0.5 SHORT-TERM INVESTMENTS 4.4 9.5 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO NOVARTIS AG (REG.) 1.6 1.5 (SWITZERLAND, DRUGS & PHARMACEUTICALS) NESTLE SA (REG.) 1.4 0.8 (SWITZERLAND, FOODS) CREDIT SUISSE GROUP (REG.) 1.4 0.8 (SWITZERLAND, BANKS) PHILIPS ELECTRONICS NV (BEARER) 1.3 0.3 (NETHERLANDS, ELECTRICAL EQUIPMENT) ING GROEP NV 1.3 0.3 (NETHERLANDS, INSURANCE) TELEFONICA DE ESPANA SA SPONSORED ADR 1.3 0.3 (SPAIN, TELEPHONE SERVICES) SHELL TRANPORT & TRADING CO. PLC (REG.) 1.2 1.2 (UNITED KINGDOM, OIL & GAS) AKZO NOBEL NV 1.2 0.7 (NETHERLANDS, CHEMICALS & PLASTICS) SOCIETE GENERALE CLASS A 1.0 0.7 (FRANCE, BANKS) UNILEVER NV ADR 1.0 0.9 (NETHERLANDS, HOUSEHOLD PRODUCTS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 31.1 28.5 UTILITIES 9.6 7.1 BASIC INDUSTRIES 7.6 6.8 NONDURABLES 7.3 7.6 ENERGY 5.9 6.4 HEALTH 5.5 4.8 DURABLES 4.9 5.2 TECHNOLOGY 4.7 5.7 MEDIA & LEISURE 4.4 3.7 INDUSTRIAL MACHINERY & EQUIPMENT 4.3 3.5 DIVERSIFIED INTERNATIONAL INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 86.9% SHARES VALUE (NOTE 1) ARGENTINA - 0.4% Telecom Argentina Class B sponsored ADR 100,000 $ 3,600,000 YPF Sociedad Anonima sponsored ADR representing Class D shares 90,000 3,138,750 6,738,750 AUSTRALIA - 2.6% AAP Telecommunications Properties Ltd. 759,123 1,628,194 Australia & New Zealand Banking Group Ltd. 1,000,000 6,956,415 Australian Oil & Gas Corp. Ltd. 700,000 732,494 Colonial Ltd. 332,156 1,165,778 Commonwealth Bank of Australia (d) 550,000 6,581,069 Consolidated Rutile Ltd. (a) 154,282 43,119 FAI Insurance Ltd. Ord. 9,004,642 2,692,181 Fosters Brewing Group Ltd. 750,000 1,628,125 Gandel Retail Trust GAN 650,000 515,410 Henry Walker Group Ltd. 50,000 65,645 Macquarie Bank Ltd. 90,000 842,335 National Australia Bank Ltd. (a) 100,000 1,416,891 National Mutual Property Trust 1,033,333 839,518 Newcrest Mining Ltd. (a) 100,000 181,986 News Corp. Ltd. sponsored ADR (ltd. vtg.) 275,000 6,410,938 Normandy Mining Ltd. 1,600,000 1,778,263 North Ltd. 100,000 291,828 Pacific Dunlop PLC (a) 200,000 369,172 Premier Investment Ltd. 185,000 276,554 Qantas Airways Ltd. 500,000 760,442 QNI Ltd. 5,000,000 2,924,775 St. George Bank Ltd. 100,000 592,104 Santos Ltd. 337,500 1,213,050 Savage Resources Ltd. 308,436 140,328 Savage Resources Ltd. (warrants) (a) 5,500 21 Seven Network Ltd. 100,000 358,122 Telstra Corp. Ltd. (e) 200,000 467,964 Tyndall Australia Ltd. 900,000 1,550,131 Tyndall Australia Ltd. rights 5/14/98 (a) 90,000 36,267 United Energy Ltd. 774,100 1,182,347 Western Mining Holdings Ltd. 2,010,245 7,133,811 Westfield Trust 550,000 1,158,568 51,933,845 AUSTRIA - 0.6% Austria Tabak AG (a)(d) 60,000 3,756,084 OMV AG (d) 10,000 1,483,123 RHI AG 10,000 504,927 Vae AG 40,000 3,852,637 Voest-Alpine Stahl AG 50,000 2,049,780 11,646,551 BAHAMAS - 0.3% Sun International Hotels Ltd. Ord. (a) 150,000 6,890,625 BELGIUM - 0.2% Telinfo SA 35,000 3,164,642 BERMUDA - 0.5% Lasalle Re Holdings Ltd. 20,000 731,250 PartnerRe Ltd. 20,000 1,001,250 RenaissanceRe Holdings Ltd. 20,000 955,000 Terra Nova Holdings Ltd. 218,000 6,676,250 9,363,750 SHARES VALUE (NOTE 1) BRAZIL - 0.8% Compania Cervejaria Brahma PN: (Pfd. Reg.) warrants 4/30/03 (a) 188,529 $ 14,838 (Pfd. Reg.) 3,000,000 1,954,440 Compania Energertica Minas Gerais 15,000,000 727,997 Petrobras PN (Pfd. Reg.) 30,000,000 7,607,889 Telebras sponsored ADR 40,000 4,872,500 15,177,664 CANADA - 4.8% Alliance Forest Products, Inc. (a) 100,000 2,106,992 BCE, Inc. 350,000 14,895,699 Canadian Pacific Ltd. 285,000 8,365,072 Canadian National Railway Co. 100,000 6,502,673 Canadian Natural Resources Ltd. (a) 200,000 4,297,844 Chum Ltd. Class B 100,000 3,843,600 Connor Clark Ltd., Class A (non-vtg.) 200,000 1,215,975 Dundee Bancorp, Inc. Class A (sub. vtg.) (a)(d) 75,000 1,496,384 Edperbrascan Corp. Ltd., Class A (vtg.) 300,000 6,121,807 Greenstone Resources Ltd. (a) 50,000 303,994 Harrowston, Inc. Class A (a) 200,000 747,755 International Verifact, Inc. (a) 50,000 365,142 Investors Group Inc. 50,000 1,904,329 Marsulex, Inc. (a) 175,000 953,912 Midland Walwyn, Inc. 350,000 5,760,159 Moore Corporation Ltd. 200,000 3,123,799 National Bank of Canada 300,000 6,184,702 Newtel Enterprises Ltd. 30,000 837,555 PC Docs Group International, Inc. (a) 100,000 559,069 Power Corporation of Canada 100,000 3,993,850 Power Financial Corp. 40,000 1,601,733 QLT Phototherapeutics, Inc. (a) 100,000 1,747,091 Rio Alto Exploration Ltd. (a) 650,000 7,495,021 Russel Metals, Inc. Class A (a) 225,000 880,534 St Laurent Paperboard, Inc. (a) 300,000 4,077,711 SMED International, Inc. 50,000 929,452 Southam, Inc. 50,000 913,729 Suncor, Inc. 10,000 344,526 Telus Corp. 50,000 1,347,007 Transat AT, Inc. (a) 50,000 384,360 Trilon Financial Corp. Class A 300,000 2,714,980 UniHost Corp. (sub. vtg.) (a) 200,000 1,390,685 97,407,141 CHILE - 0.1% Santa Isabel SA sponsored ADR 149,925 2,473,763 DENMARK - 3.4% Alm Brand AS Class B (Reg.) (a) 25,000 846,814 Amtsspar Fyn Holding AS 25,000 1,686,328 Danisco AS 50,000 3,139,053 Den Danske Bank Group AS 50,000 6,059,102 FIH AS Class B 250,000 6,052,897 Forsikringsselskabet Codan AS 25,000 3,942,066 Jyske Bank AS (Reg.) 50,000 5,803,598 Novo-Nordisk AS Class B 30,000 4,861,882 Nordvestbank (Reg.) 400 46,838 Spar Nord Holding 25,000 1,376,073 Syd-Sonderjylland Holding 175,000 9,760,264 Telepartner AS sponsored ADR (a) 150,000 815,625 Unidanmark AS Class A 150,000 12,592,712 Vestas Wind Systems AS (d) 40,090 1,726,705 Vest-Wood AS 60,000 6,044,502 Tryg Baltica Forsikring AS (Reg.) 50,000 3,431,058 68,185,517 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ESTONIA - 0.0% Eesti Uhispank AS sponsored GDR (a)(d) 40,000 $ 538,000 FINLAND - 3.9% Cultor OY Ord., Series 2 15,000 888,665 Enso OY Class R 1,400,000 14,893,617 Finnair OY 700,000 7,190,022 Huhtamaki Ord. 90,000 5,199,927 Instrumentarium OY Class B 50,000 3,099,780 Kesko OY 200,000 3,231,842 Merita Ltd., Series A 500,000 3,338,225 Metsa-Serla Ltd. Class B 600,000 6,217,902 Metsa Tissue Oyj Corp. 100,000 1,155,539 Nokia Corp. AB sponsored ADR 100,000 6,687,500 Rauma OY 75,000 1,403,155 Tamro OYJ 300,000 2,146,001 Teito Corp. Class B 42,000 7,703,595 Tulikivi OY Series A 35,000 770,360 UPM-Kymmene Corp. 400,000 11,995,598 Valmet OY 200,000 3,305,209 79,226,937 FRANCE - 8.7% Accor SA 10,000 2,722,818 Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 450,000 16,312,500 Axa SA 75,000 8,796,412 Business Objects SA sponsored ADR (a) 25,000 471,875 Carbonne-Lorraine 5,000 2,047,512 Compagnie Generale de Geophysique SA sponsored ADR 99,500 2,860,625 Credit Commercial de France Ord. 100,000 7,974,084 Dexia France 50,000 6,047,014 Elf Aquitaine SA sponsored ADR 300,000 19,481,250 Eurafrance (Societe) 15,000 8,422,626 Immobiliere Marseillaise, ste, Class B 1,255 2,391,370 LVMH (Moet-Hennessy Louis Vuitton) sponsored ADR 10,000 2,056,649 Lafarge SA 50,000 4,718,000 Lagardere S.C.A. (Reg.) 100,000 3,820,915 Marine Wendel SA 30,000 5,332,669 Michelin SA (Compagnie Generale des Etablissements) Class B 50,663 3,189,004 Pernod-Ricard 100,000 6,894,260 Paribas SA (Cie Financiere) Class A 50,000 5,316,056 Renault SA Ord. (a) 50,000 2,317,468 Remy Cointreau SA 100,000 1,960,296 Rhone Poulenc SA Class A 100,000 4,885,788 Scor SA 150,000 9,239,970 Societe Generale Class A 100,000 20,799,070 Total SA Class B 125,000 14,847,579 Union Assurances Federale SA 75,000 11,724,396 174,630,206 GERMANY - 5.2% Adidas-Salomon AG 5,000 835,236 Allianz AG (Reg.) 35,000 11,330,809 Allianz AG (RFD) (a) 1,176 358,189 Andrea-Noris Zahn 45,000 1,678,824 BASF AG 200,000 9,065,093 Bayer AG 120,000 5,352,859 BERU AG 24,500 579,793 Berlinger Bank AG 50,000 1,187,427 Buderus AG 10,000 4,694,025 Commerzbank AG 150,000 5,846,651 SHARES VALUE (NOTE 1) Daimler-Benz AG Ord. 50,000 $ 4,951,556 Deutsche Bank AG 150,000 11,893,758 Depfa Bank (Deut Pfandbrief) 100,000 7,795,534 Deutsche Telekom AG 200,000 5,234,144 DIS Deutscher Industrie Service AG (d) 15,000 893,702 Mannesmann AG Ord. 3,000 2,482,321 Metallgesellschaft AG Ord. 100,000 2,145,999 Phoenix AG 10,000 201,292 Rhein West Electric 50,000 2,586,447 SAP AG (Systeme Anwendungen Produkte) 5,000 2,400,329 Siemens AG 25,000 1,480,455 Springer Axel Verlag AG (Reg.) 2,500 2,220,335 Thyssen AG Ord. 50,000 11,665,460 Veba AG Ord. 100,000 6,654,045 103,534,283 HONG KONG - 0.2% Hutchison Whampoa Ltd. Ord. 500,000 3,090,921 Jardine Strategic Holdings Ltd. Ord. 500,000 1,300,000 Peregrine Investments Holdings Ltd. 546,000 1 4,390,922 INDONESIA - 0.0% PT Cahaya Kalbar 292,000 44,713 PT Bank PAN Indonesia 660 52 44,765 IRELAND - 1.4% Anglo-Irish Bank Corp. PLC 2,000,000 5,346,560 Bank of Ireland, Inc. 100,000 2,040,047 CRH PLC 100,000 1,420,180 FBD Holdings PLC 60,000 441,945 Hibernian Group PLC 303,909 3,624,267 IWP International (UK Reg.) 100,000 601,488 Independent Newspapers PLC 271,053 1,630,351 IAWS Group PLC Class A (Reg.) 70,000 298,238 Irish Life PLC 950,000 8,809,293 Jurys Hotel Group PLC (UK) 151,692 1,305,252 Ryan Hotels Ltd. 1,500,000 2,004,960 27,522,581 ISRAEL - 0.2% RIT Technologies Ltd. 20,000 265,000 TTI Team Telecom International Ltd. (a) 20,000 160,000 Tecnomatix Technologies 125,000 3,171,875 3,596,875 ITALY - 2.8% Assicurazioni Generali Spa 400,000 11,972,696 Bulgari Spa 100,000 611,735 Credito Italiano Ord. 2,500,000 13,077,577 Eni Spa sponsored ADR 25,000 1,653,125 Istituto Mobiliare Italiano 50,000 813,963 Istituto Nazionale Delle Assicurazioni Spa 1,500,000 4,471,651 Manuli Rubber Industries Spa 50,000 270,804 SAES Getters SPA sponsored ADR 100,000 1,150,000 Telecom Italia Spa 2,200,000 16,563,614 Telecom Italia Mobile Spa 1,100,000 6,297,773 56,882,938 JAPAN - 11.1% Acom Co. Ltd. 100,000 5,262,563 Aiful Corp. (d) 25,000 1,648,786 Aichi Machine Industry Co. Ltd. 100,000 207,039 Aronkasei Co. Ltd. 150,000 363,636 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) JAPAN - CONTINUED Bunka Shutter Co. Ltd. 300,000 $ 801,807 Canon, Inc. 225,000 5,302,089 Chofu Seisaku Co. Ltd. 50,000 722,755 Chiyoda Fire & Marine Insurance Co. Ltd. 550,000 2,140,787 Chiyoda Co. 50,000 327,499 Chukyo Coca Cola Bottling Co. Ltd. 25,000 201,393 Citizen Watch Co. Ltd. Ord. 500,000 3,350,273 Comany, Inc. 100,000 790,514 Credit Saison Co. Ltd. 100,000 2,160,738 Daiichi Pharmaceutical Co. Ltd. 250,000 3,574,252 Denyo Co. Ltd. 96,000 484,246 Diamond City Co. Ltd. 100,000 466,780 Fuji Coca-Cola Bottling Co. Ltd. 161,000 1,721,212 Fuji Fire & Marine Insurance Co. Ltd. 250,000 592,885 Fuji Photo Film Co. Ltd. 150,000 5,319,029 Fuji Rebio 100,000 297,384 Fujitsu Ltd. 150,000 1,744,777 Fujitsu Business Systems Ltd. 125,000 1,929,230 Fukushima Industries Corp. 100,000 639,940 Fukuda Denshi Co. Ltd. 25,000 303,030 Gakken Co. Ltd. 50,000 98,626 Gunze Ltd. 100,000 222,097 HEC Corp. 50,000 131,752 Hibiya Engineering Ltd. 80,000 379,447 Higashi Nihon House Co. Ltd. 90,000 386,222 Hitachi Koki Co. Ltd. Ord. 150,000 603,049 Hitachi Ltd. 1,000,000 7,144,739 Hokkaido Coca-Cola Bottling Co. 109,000 1,101,284 Honda Motor Co. Ltd. 100,000 3,613,777 Horiba Ltd. 25,000 284,209 Horipro Inc. 145,000 950,838 Hogy Medical Co. 25,000 756,635 Itoki Crebio Corp. 225,000 662,338 Isewan Terminal Service Co. Ltd. 200,000 504,423 Jafco Co. Ltd. 200,000 6,640,316 Japan Maintenance Co. Ltd. 70,000 474,308 Japan Wool Textile 50,000 235,272 Jichodo Co. Ltd. 204,000 1,360,768 Kameda Seika Co. Ltd. 11,000 40,663 Kao Corp. 300,000 4,392,998 Kawagishi Bridge Works Co. Ltd. 225,000 643,704 Kawasumi Laboratories, Inc. 25,000 388,669 Kentucky Fried Chicken Japan 200,000 2,047,807 Kyowa Hakko Kogyo Co. Ltd. 50,000 203,275 Kuraya Corp. 10,000 49,765 Konishi Co. Ltd. 10,000 104,950 Kuwazawa Trading Co. Ltd. 17,000 34,557 Levi Strauss Japan 263,000 2,138,453 Mabuchi Motor Co. 25,000 1,441,747 Maezawa Kasei Industries Co. Ltd. 56,900 685,413 Makita Corp. 100,000 1,084,133 Maruzen Showa Unyu Co. Ltd. 225,000 431,959 Matsushita Electric Industrial Co. Ltd. 600,000 9,576,510 Matsushita Communication Industrial Co. Ltd. 100,000 2,943,723 Matsushita Electric Works Co. Ltd. 100,000 895,916 Meiki Co. Ltd. 50,000 213,815 Meitec Corp. 100,000 3,274,986 Minebea Co. Ltd. 1,000,000 11,142,480 Minolta Camera Co. Ltd. 550,000 3,561,077 Mitsubishi Estate Co. Ltd. 100,000 963,674 Mitsui Marine & Fire Insurance Co. 350,000 1,789,196 Mitsui Home Co. Ltd. 50,000 282,326 SHARES VALUE (NOTE 1) Mitsui Wood Systems, Inc. 25,000 $ 86,392 Murakami Corp. 100,000 398,268 Nagase & Co. Ltd. 25,000 90,344 Nagawa Co. Ltd. 25,000 111,989 Nintendo Co. Ltd. Ord. 110,000 10,053,830 Nippon Telegraph & Telephone Corp. Ord. 600 5,239,977 Nittetsu Mining Co. Ltd. 200,000 778,468 Nitto Denko Corp. 100,000 1,520,798 Nomura Securities Co. Ltd. 300,000 3,647,657 Noda Corp. 50,000 237,154 NTT Data Communications System 40 1,722,567 Nichicon Corp. 200,000 2,168,266 Nihon Kagaku Sangyo Co. Ltd. 200,000 594,768 Nissho Corp. 100,000 737,813 Nissei Industries Ltd. 25,000 188,218 Nishio Rent All Co. Ltd. 50,000 421,607 Omron Corp. 150,000 2,343,309 Promise Co. Ltd. 100,000 5,059,288 Ricoh Leasing Co. Ltd. 105,000 925,692 Ricoh Elemex Corp. 150,000 1,016,375 Riken Vitamin Oil Co. Ltd. 308,000 2,260,870 Royal Co. Ltd. 100,000 1,358,931 Sangetsu Company Ltd. 150,000 1,908,526 Sankyo Co. Ltd. 100,000 2,469,415 Shikoku Coca-Cola Bottling Co., Ltd. 93,400 985,156 Secom Co. Ltd. 100,000 5,872,388 Sekisui House Ltd. 300,000 2,335,404 Senshukai Co. Ltd. 100,000 493,130 Sankyo Co. Ltd. (Gunma) 50,000 798,043 Senshu Electric Co. Ltd. (a) 100,000 662,526 Shinko Shoji Co. Ltd. 50,000 300,772 Shiseido Co. Ltd. 100,000 1,313,759 Snow Brand Seed Co. Ltd. 46,000 162,771 Sony Corp. 120,000 10,194,418 Sotoh Co. Ltd. 75,000 513,834 Sonton Food Industry Co. Ltd. 150,000 1,276,115 SRL, Inc. 100,000 493,130 Sumitomo Marine and Fire Insurance Co. Ltd. 300,000 1,782,044 TDK Corp. 20,000 1,575,005 Takeda Chemical Industries Ltd. 275,000 7,826,087 Taihei Dengyo Kaisha Ltd. 22,000 91,097 Takeda Printing Co. Ltd. 10,000 67,758 Takefuji Corp. 125,000 6,540,561 Terumo Corp. 100,000 1,459,063 THK Co. Ltd. 100,000 956,145 Tokio Marine & Fire Insurance Co. Ltd. (The) 650,000 7,046,866 Tokyo Style Co. Ltd. 75,000 677,583 Toyoda Automatic Loom Works Ltd. 273,000 4,809,486 Toyota Motor Corp. 125,000 3,246,753 Topcon Corp. 10,000 46,603 Toyota Corrolla Gifu Co. Ltd. 7,000 65,402 Toyo Corp. 100,000 813,853 Tsuchiya Home Co. Ltd. 50,000 199,511 Wakita & Co. Ltd. 25,000 118,577 Yurtec Corp. 50,000 265,387 Yamada Corp. 50,000 94,109 Yokogawa Electric 150,000 780,350 Yokogawa Bridge Works 100,000 271,033 223,709,781 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) KOREA (SOUTH) - 0.1% Nam Yang Dairy Products 25,000 $ 1,683,502 SK Telecom Ltd. 1,000 609,428 Samsung Fire & Marine Insurance 1,762 520,756 2,813,686 LUXEMBOURG - 0.2% Espirito Santo Financial Holding SA ADR 50,000 1,290,625 Quilmes Industrial SA sponsored ADR 250,000 2,765,625 4,056,250 MALAYSIA - 0.0% Oriental Holdings BHD 360,000 752,311 MEXICO - 0.3% Corporacion Geo SA de CV (a) 250,000 1,725,153 Elamex SA de CV (a) 154,800 1,044,900 Grupo Financiero Bancomer Class B 2,000,000 1,380,122 Grupo Financiero Inbursa SA Class B 400,000 1,219,972 5,370,147 NETHERLANDS - 8.1% ABN-AMRO Holdings NV 300,000 7,300,064 Aegon NV Ord. 25,000 3,239,527 AKZO Nobel NV 120,000 24,392,898 Benckiser NV Class B 75,000 4,373,362 DSM NV 51,612 5,169,113 EVC International NV 100,000 1,953,608 Hagemeyer NV 100,000 4,772,739 ING Groep NV 400,000 25,856,867 KLM Royal Dutch Air Lines NV 25,000 1,014,062 Koninklijke Hoogovens NV 50,000 2,250,359 Koninklijke Pakhoed NV 50,000 1,829,962 Melia Inversiones Americanas NV (a) 8,500 423,593 Philips Electronics NV (Bearer) 300,000 27,000,000 Royal Dutch Petroleum Co. 100,000 5,656,250 Royal Ptt Nederland NV 350,000 18,072,110 Samas-Groep NV 50,000 3,098,571 Smit International NV 100,004 2,918,164 Telegraaf 100,000 2,319,600 Unilever NV ADR 275,000 20,521,875 Vedior NV 40,000 1,214,699 163,377,423 NEW ZEALAND - 0.4% Air New Zealand Ltd. Class B 800,000 1,129,650 CDL Hotels New Zealand Ltd. 184,400 27,570 Fletcher Challenge Paper Ltd. 1,500,000 2,201,156 Independent Newspapers Ltd. 350,000 1,482,666 Lion Nathan Ltd. 700,000 1,852,848 Telecom Corp. of New Zealand (f) 195,000 521,549 Tranz Rail Holdings Ltd. sponsored ADR 75,000 787,500 8,002,939 NORWAY - 2.3% Bergensbanken ASA 38,700 380,962 Choice Hotels Skandanavia ASA (a) 150,000 482,154 Color Lines 200,000 696,444 Det Sondenfjelds-Norske Dampskibsselskab, Class A (a)(d) 75,000 1,848,256 Den Norske Bank AS Class A Free shares 1,300,000 6,825,152 Merkantildata 750,000 9,442,175 Norsk Hydro AS 50,000 2,491,127 Petroleum Geo-Services AS sponsored ADR (a) 50,000 3,287,500 SHARES VALUE (NOTE 1) Saga Petroleum AS: Class A 50,000 $ 991,094 Class B 50,000 890,645 Smedvig AS, Series A 100,000 2,116,119 Schibsted AS, Series B 500,000 9,509,141 Sparebanken Norway primary shares certificates 150,000 5,183,151 Superoffice AS (a) 65,000 130,583 Tandberg Data AS (a) 25,000 246,099 Tandberg Television ASA (a) 100,000 1,319,226 45,839,828 PORTUGAL - 0.8% Electricidade de Portugal SA 125,000 3,259,276 Portugal Telecom SA 79,000 4,242,029 Telecel Comunicacoes Pessoais SA (a) 50,000 8,963,008 16,464,313 RUSSIA - 0.1% Luk Oil Co. sponsored ADR 35,000 2,318,750 SINGAPORE - 0.1% Delgro Corp. Ltd. 300,000 344,806 Haw Par Brothers International Ltd. (a) 500,000 574,676 Robinson & Co. Ltd. 100,000 296,811 Times Publishing Ltd. 800,000 1,374,171 2,590,464 SOUTH AFRICA - 1.6% Anglo American Corp. of South Africa Ltd. (Reg.) 50,000 2,958,346 Anglogold Ltd. ADR 200,000 1,012,500 Anglogold Ltd. 125,000 6,629,069 Driefontein Consolidated Ltd. Ord. 50,000 354,705 Free State Consolidated Gold Mines Ltd. Ord. 1,200,000 7,361,235 Gencor Ltd. (Reg.) 200,000 476,897 Ingwe Coal Corp. Ltd. 219,400 785,820 Rembrandt Group Ltd. 150,000 1,365,390 Sasol, Ltd. 50,000 504,601 South African Breweries Ltd. 150,000 5,034,135 Southvaal Holdings Ltd. 20,000 435,342 Western Deep Levels Ltd. Ord. 150,000 4,197,091 31,115,131 SPAIN - 2.4% Argentaria Corporacion Bancaria de Espana SA (a) 75,000 6,245,697 Banco Bilbao Vizcaya SA Ord. (Reg.) 50,000 2,570,408 Banco De Santander SA de Credito ADR 40,000 2,095,000 Endesa SA sponsored ADR 80,000 1,940,000 Mapfre Vida SA 100,000 4,983,443 Repsol SA sponsored ADR 35,000 1,914,063 Telefonica de Espana SA : rights 5/4/98 70,000 157,500 sponsored ADR 204,800 25,587,200 Union Electrica Fenosa SA 200,000 2,583,522 48,076,833 SWEDEN - 5.0% ADB-Gruppen Mandator AB 75,000 2,166,177 Astra AB Class A Free shares 300,000 6,150,395 Atle AB 150,000 2,804,425 Celsius Industrier AB Class B 300,000 6,653,257 Custos AB, Class B 50,000 1,289,391 Electrolux AB 25,000 2,320,904 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SWEDEN - CONTINUED Ericsson (L.M.) Telephone Co. Class B ADR 50,000 $ 2,571,875 Finnveden Invest AB Class B Free shares 100,000 2,204,858 Forvaltnings AB Ratos Class B Free shares 500,000 5,544,381 Hemkopskedjan AB, Series B 300,000 4,080,922 Investor AB Class B Free shares 80,000 4,507,711 Kinnevik Investment B Free shares 150,000 4,264,660 Louis Gibeck AB Class B (a) 100,000 844,551 Modern Times Group Mortgage AB, Series B (a) 310,000 2,957,863 Mo Och Domsjoe AB Class B 200,000 6,189,076 Netcom Systems AB, Class B (a) 250,000 8,477,745 NK Cityfastigheter AB 200,000 1,882,511 Nordbanken Holding AB 350,000 2,572,335 PLM AB 50,000 899,350 Resco AB, Series B 50,000 1,224,921 SKF AB Ord. 250,000 5,028,624 Skandinaviska Enskilda Banken Class A Free shares 100,000 1,663,314 Swedish Match Co. 4,039,000 13,957,038 Svedala Industri Free shares 25,000 594,732 Trelleborg Class B Free shares 50,000 670,483 WM Data Nordic AB, Series B 300,000 9,012,842 100,534,341 SWITZERLAND - 7.1% Bank for International Settlements 500 3,263,838 Bucher Holding AG (Bearer) 2,000 2,304,669 Ciba Specialty Chemicals AG (a) 25,000 3,022,381 Credit Suisse Group (Reg.) 125,000 27,476,187 Compagnie Financiere Richemont AG Class A Unit (Bearer) 2,000 2,864,184 Edipresse SA, Lausanne 25,000 7,993,073 Jelmoli, Grands Magasins SA 1,000 1,145,674 Julius Baer Holding AG 4,000 11,030,440 Nestle SA (Reg.) 15,000 29,074,802 Novartis AG (Reg.) 19,000 31,382,414 Publicitas Holding SA (Reg.) 10,000 2,597,749 Roche Holding AG 1,500 15,191,834 Sarna Kunststoff Holding AG 1,260 2,140,145 Sulzer AG (Reg.) 5,000 3,580,230 Usego Hofer Curti AG (Reg.) 500 126,557 143,194,177 THAILAND - 0.0% ICC International PLC (For. Reg.) 4,500 6,479 UNITED KINGDOM - 10.8% Aggregate Industries PLC 2,000,000 2,472,784 Allied Domecq PLC 400,000 4,110,168 Alpha Airports Group PLC 200,000 314,110 Anglian Water PLC Ord. 300,000 4,591,358 Arjo Wiggins Appleton PLC 50,000 177,523 Asda Group PLC 1,000,000 3,345,777 BAA PLC Ord. 200,000 2,033,364 BAT Industries PLC Ord. 700,000 6,596,318 Barclays PLC Ord. 200,000 5,764,260 BTP PLC 300,000 2,120,245 Billiton PLC 1,000,000 2,857,068 British Petroleum PLC ADR 30,124 2,846,718 British Vita Ord. 100,000 543,010 Budgens PLC 500,000 632,816 Cookson Group PLC 1,500,000 6,729,147 Crest Nicholson PLC 200,000 399,321 Diageo PLC 172,800 2,055,645 SHARES VALUE (NOTE 1) Dorling Kindersley Holdings PLC, Class L 500,000 $ 2,146,978 English China Clay PLC 800,000 3,294,818 Glaxo PLC sponsored ADR 25,000 1,414,063 Granada Group PLC 100,000 1,720,924 Greenalls Group PLC 150,000 1,210,495 HSBC Holdings PLC 305,036 8,969,913 Hanson PLC 150,000 884,062 House of Fraser PLC Class L 1,000,000 2,656,572 Hyder PLC 355,895 5,720,335 Iceland Group PLC 200,000 743,506 International Business Communications Holdings PLC Class L 300,000 2,556,324 Lloyds TSB Group PLC 300,000 4,488,604 London Pacific Group Ltd. 550,000 1,957,342 Man (E D & F) Group PLC 500,000 2,046,730 Mcbride PLC 800,000 2,606,448 National Grid Co. PLC 550,000 3,547,108 National Westminster Bank PLC Ord. 150,000 2,999,921 Norcros PLC Class L 116,300 132,134 Paterson Zochonis 221,900 1,523,785 Persimmon PLC Ord. 513,545 2,093,596 Powerscreen International PLC 1,000,000 3,090,980 Railtrack PLC Class L 75,000 1,369,012 Ramco Energy PLC 100,000 1,052,604 Rentokil Initial PLC 500,000 3,218,379 Rio Tinto PLC (Reg.) 200,000 2,868,764 RJB Mining PLC 150,000 308,263 Royal & Sun Alliance Insurance Group PLC 700,000 7,812,661 Safeway PLC 308,137 1,835,388 Scottish Power PLC ADR 500,000 4,592,612 Scottish Hydro-Electric PLC Ord. 250,000 2,460,253 Shell Transport & Trading Co. PLC (Reg.) 3,300,000 24,535,698 Signet Group PLC (a) 5,000,000 3,550,450 Severn Trent PLC 500,000 7,994,778 Smiths Industries PLC Ord. 50,000 718,862 SmithKline Beecham PLC ADR 150,000 8,934,375 Stakis PLC 1,000,000 2,155,332 Thames Water PLC Ord. 250,000 4,072,575 Tomkins PLC Ord. 2,015,005 11,850,680 Unilever PLC ADR 250,000 10,562,500 Vodafone Group PLC sponsored ADR 25,000 2,748,438 WPP Group PLC (a) 800,000 5,072,549 Vaux Group PLC 200,000 908,915 Whitbread & Co. PLC Class A 150,000 2,588,905 Yorkshire Water PLC 200,000 1,603,968 216,210,231 UNITED STATES OF AMERICA - 0.4% Brio Technology, Inc. 700 7,700 Heller Financial, Inc. Class A 6,000 162,000 Orthofix International (a) 614,100 7,983,300 8,153,000 TOTAL COMMON STOCKS (Cost $1,389,854,543) 1,745,935,839 CLOSED-END INVESTMENT COMPANIES - 6.3% AUSTRIA - 0.2% Austria Fund, Inc. 350,000 4,506,250 BRAZIL - 0.2% Brazil Fund, Inc. 150,000 3,412,500 CLOSED-END INVESTMENT COMPANIES - CONTINUED SHARES VALUE (NOTE 1) CANADA - 0.6% Canadian General Investment Ltd. 134,100 $ 1,625,937 Economic Investment Trust Ltd. 64,592 5,822,962 United Corporations Ltd. 77,261 3,293,561 10,742,460 CHILE - 0.1% Chile Fund, Inc. 100,000 1,618,750 Five Arrows Chile Investment Trust Ltd. 500,000 1,160,000 2,778,750 EMERGING MARKETS - 1.3% ASEAN Supreme Fund Ltd. (a) 2,800 12,488 Asia Tigers Fund, Inc. 400,000 3,025,000 Central European Equity Fund 180,000 3,555,000 Central European Value Fund, Inc. 25,000 321,875 Emerging Markets Telecommunication Fund, Inc. 160,000 2,290,000 Emerging Markets Infrastructure Fund, Inc. 480,000 5,610,000 Latin America Growth Fund, Inc. 100,000 943,750 Morgan Stanley Africa Investment Fund, Inc. 80,000 1,150,000 New South Africa Fund, Inc. 25,000 400,000 Scudder New Europe Fund, Inc. 250,000 5,093,750 Southern Africa Fund, Inc. 75,000 1,284,375 Templeton Dragon Fund, Inc.. 200,000 2,200,000 25,886,238 FRANCE - 0.3% France Growth Fund, Inc. 460,000 6,296,250 GERMANY - 0.9% Emerging Germany Fund, Inc . 200,000 2,862,500 New Germany Fund, Inc. (The) 800,000 14,300,000 17,162,500 INDIA - 0.1% India Fund 180,000 1,485,000 Jardine Fleming India Fund, Inc. 100,000 718,750 2,203,750 IRELAND - 0.1% Irish Investment Fund, Inc. 100,000 2,475,000 ISRAEL - 0.0% First Israel Fund, Inc. 52,000 708,500 ITALY - 0.2% Italy Fund, Inc. (The) 285,000 4,150,313 MEXICO - 0.4% Mexico Fund, Inc. (The) 400,000 $ 7,275,000 MULTI-NATIONAL - 0.7% Americas Income Trust, Inc. 50,000 453,125 Blackrock North American Government Income Trust, Inc. 350,000 3,696,875 Clemente Global Growth Fund, Inc.. 3,000 34,875 Invesco Global Health Sciences Fund 70,000 1,382,500 Morgan Stanley Asia-Pacific Fund, Inc. 325,000 2,417,188 MFS Government Markets Income Trust 700,000 4,506,250 Royce Global Trust, Inc. 50,000 296,875 Strategic Global Income Fund, Inc. 150,000 1,818,750 14,606,438 SHARES VALUE (NOTE 1) PHILIPPINES - 0.0% First Phillipine Fund 10,000 $ 75,625 POTRUGAL - 0.2% Portugal Fund, Inc. 158,900 3,565,319 SINGAPORE - 0.0% WEBS Index Fund, Inc. 75,000 473,438 SPAIN - 0.5% Growth Fund of Spain, Inc. 300,000 6,468,750 Spain Fund, Inc. 218,900 4,159,100 10,627,850 SWITZERLAND - 0.2% Swiss Helvetia Fund, Inc. 150,000 4,593,750 TAIWAN - 0.3% Taiwan Fund, Inc. 250,000 4,125,000 Taiwan Equity Fund, Inc. 90,000 1,035,000 5,160,000 TOTAL CLOSED-END INVESTMENT COMPANIES (Cost $113,873,394) 126,699,931 PREFERRED STOCKS - 1.3% CONVERTIBLE PREFERRED STOCKS - 0.1% AUSTRALIA - 0.1% Village Roadshow Ltd. PRIDES (d) 40,000 1,910,000 NONCONVERTIBLE PREFERRED STOCKS - 1.2% AUSTRIA - 0.1% Bank Austria AG 21,500 1,670,587 Miba Holdings AG, Class B 15,000 914,091 2,584,678 GERMANY - 0.5% Volkswagen AG 15,100 9,484,270 ITALY - 0.2% Telecom Italia Spa 800,000 4,215,064 PORTUGAL - 0.1% Lusomundo (Filmes) SA (non-vtg.) 120,000 1,625,075 UNITED STATES OF AMERICA - 0.3% Freeport McMoran Copper & Gold, Inc.: Series B 130,000 3,266,250 Depositary shares representing gold pfd., Series II 100,000 2,237,500 5,503,750 TOTAL NONCONVERTIBLE PREFERRED STOCKS 23,412,837 TOTAL PREFERRED STOCKS (Cost $18,208,484) 25,322,837 CONVERTIBLE BONDS - 1.0% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) AMOUNT (C) (NOTE 1) FINLAND - 0.3% Metsa Serla OY 4 3/8%, 10/15/02 (d) - $ 5,000,000 $ 5,375,000 FRANCE - 0.1% Axa SA 4 1/2%, 1/1/99 - FRF 25,000 2,969,516 LUXEMBOURG - 0.1% Espirito Santo Financial Holding SA 8 3/4%, 4/10/03 - XEU 1,000,000 1,762,560 NETHERLANDS - 0.2% Bilbao Vizcaya Investments BV 3 1/2%, 7/12/06 Aa3 1,000,000 3,170,000 SWITZERLAND - 0.2% Swiss Life Finance Ltd. 1 1/2%, 5/20/03 (d) - 1,500,000 1,578,750 Swiss Life Finance Ltd. 2%, 5/20/05 (d) - 3,000,000 3,022,500 4,601,250 UNITED STATES OF AMERICA - 0.1% Nestle Holdings, Inc. 3%, 6/17/02 1,600,000 2,072,000 TOTAL CONVERTIBLE BONDS (Cost $16,216,868) 19,950,326 GOVERNMENT OBLIGATIONS - 0.1% ITALY - 0.1% Italian Republic 5%, 6/28/01 (Cost $995,400) Aa3 790,000 1,368,675 CASH EQUIVALENTS - 4.4% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (Cost $89,365,773) (b) 89,365,773 89,365,773 TOTAL INVESTMENTS IN SECURITIES - 100% (Cost $1,628,514,462) $ 2,008,643,381 PREFERRED STOCK ABBREVIATIONS PRIDES - Preferred redeemable increased dividend equity securities. CURRENCY ABBREVIATIONS AUD - Australian dollar FRF - French franc NZD - New Zealand dollar XEU - European currency unit LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Principal amount is stated in United States dollars unless otherwise noted. (d) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $31,320,359 or 1.6% of net assets. (e) Purchased on installment basis. Market value reflects only those payments made through 11/17/97. The remaining installment aggregating AUD 270,000 is due on 11/17/98. (f) Purchased on installment basis. Market value reflects only those payments made through 3/31/98. The remaining installment aggregating NZD 809,250 is due on 3/31/99. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $843,465,706 and $550,983,293, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $45,231 for the period (see Note 4 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Vae AG $ - $ 811,415 $ - $ - MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.3% Basic Industries 7.6 Cash Equivalents 4.4 Construction & Real Estate 1.7 Durables 4.9 Energy 5.9 Finance 31.1 Government Obligations 0.1 Health 5.5 Holding Companies 1.7 Industrial Machinery & Equipment 4.3 Media & Leisure 4.4 Nondurables 7.3 Precious Metals 1.6 Retail & Wholesale 1.4 Services 1.5 Technology 4.7 Transportation 2.0 Utilities 9.6 100.0% INCOME TAX INFORMATION At April 30, 1998 the aggregate cost of investment securities for income tax purposes was $1,629,305,916. Net unrealized appreciation aggregated $379,337,465, of which $437,496,956 related to appreciated investment securities and $58,159,491 related to depreciated investment securities. DIVERSFIED INTERNATIONAL FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 2,008,643,381 (COST $1,628,514,462) - SEE ACCOMPANYING SCHEDULE CASH 58,896 RECEIVABLE FOR INVESTMENTS SOLD 29,213,973 RECEIVABLE FOR FUND SHARES SOLD 11,454,411 DIVIDENDS RECEIVABLE 6,633,325 INTEREST RECEIVABLE 645,078 OTHER RECEIVABLES 12,159 TOTAL ASSETS 2,056,661,223 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 27,763,648 PAYABLE FOR FUND SHARES REDEEMED 5,026,815 ACCRUED MANAGEMENT FEE 1,355,285 OTHER PAYABLES AND 679,317 ACCRUED EXPENSES TOTAL LIABILITIES 34,825,065 NET ASSETS $ 2,021,836,158 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,588,517,138 UNDISTRIBUTED NET INVESTMENT INCOME 6,185,124 ACCUMULATED UNDISTRIBUTED 47,045,282 NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 380,088,614 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 107,431,105 SHARES OUTSTANDING $ 2,021,836,158 NET ASSET VALUE, OFFERING PRICE $18.82 AND REDEMPTION PRICE PER SHARE ($2,021,836,158 (DIVIDED BY) 107,431,105 SHARES)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 21,490,229 DIVIDENDS INTEREST 3,425,494 24,915,723 LESS FOREIGN TAXES WITHHELD (2,195,610) TOTAL INCOME 22,720,113 EXPENSES MANAGEMENT FEE $ 6,242,905 BASIC FEE PERFORMANCE ADJUSTMENT 747,495 TRANSFER AGENT FEES 2,302,687 ACCOUNTING FEES AND EXPENSES 396,116 NON-INTERESTED TRUSTEES' COMPENSATION 2,282 CUSTODIAN FEES AND EXPENSES 339,047 REGISTRATION FEES 53,353 AUDIT 25,733 LEGAL 4,377 REPORTS TO SHAREHOLDERS 89,910 MISCELLANEOUS 11,766 TOTAL EXPENSES BEFORE REDUCTIONS 10,215,671 EXPENSE REDUCTIONS (176,119) 10,039,552 NET INVESTMENT INCOME 12,680,561 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (INCLUDING 50,356,326 REALIZED LOSS OF $157,742 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN CURRENCY TRANSACTIONS (677,259) 49,679,067 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 224,995,199 ASSETS AND LIABILITIES IN (68,048) 224,927,151 FOREIGN CURRENCIES NET GAIN (LOSS) 274,606,218 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 287,286,779 OTHER INFORMATION $ 129,059 EXPENSE REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 2,054 TRANSFER AGENT CREDITS 45,006 $ 176,119
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 12,680,561 $ 16,482,301 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 49,679,067 60,480,200 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 224,927,151 84,862,601 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 287,286,779 161,825,102 DISTRIBUTIONS TO SHAREHOLDERS (17,340,492) (7,278,518) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (37,418,193) (17,468,122) TOTAL DISTRIBUTIONS (54,758,685) (24,746,640) SHARE TRANSACTIONS 874,527,539 1,829,687,888 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 53,306,996 24,250,333 COST OF SHARES REDEEMED (652,853,537) (1,142,181,507) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 274,980,998 711,756,714 TOTAL INCREASE (DECREASE) IN NET ASSETS 507,509,092 848,835,176 NET ASSETS BEGINNING OF PERIOD 1,514,327,066 665,491,890 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $6,185,124 AND $14,787,511, RESPECTIVELY) $ 2,021,836,158 $ 1,514,327,066 OTHER INFORMATION SHARES SOLD 51,064,416 113,844,123 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 3,298,675 1,681,716 REDEEMED (38,295,342) (70,452,524) NET INCREASE (DECREASE) 16,067,749 45,073,315
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 16.57 $ 14.38 $ 12.73 $ 12.46 $ 11.32 $ 8.46 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .13 D .24 D, G .15 .22 .05 .07 NET REALIZED AND UNREALIZED GAIN (LOSS) 2.72 2.46 2.13 .47 1.20 2.89 TOTAL FROM INVESTMENT OPERATIONS 2.85 2.70 2.28 .69 1.25 2.96 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.19) (.15) (.22) (.03) (.01) (.10) FROM NET REALIZED GAIN (.41) (.36) (.41) (.39) (.10) - TOTAL DISTRIBUTIONS (.60) (.51) (.63) (.42) (.11) (.10) NET ASSET VALUE, END OF PERIOD $ 18.82 $ 16.57 $ 14.38 $ 12.73 $ 12.46 $ 11.32 TOTAL RETURN B, C 17.80% 19.30% 18.66% 6.02% 11.14% 35.38% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,021,836 $ 1,514,327 $ 665,492 $ 295,017 $ 351,152 $ 255,029 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.24% A 1.25% 1.29% 1.13% 1.25% 1.47% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.21% A, E 1.23% E 1.27% E 1.12% E 1.25% 1.47% EXPENSE REDUCTIONS RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.53% A 1.49% 1.53% 1.55% .96% .84% PORTFOLIO TURNOVER RATE 71% A 81% 94% 101% 89% 56% AVERAGE COMMISSION RATE F $ .0168 $ .0153 $ .0121
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE.
INTERNATIONAL VALUE PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY INTL VALUE 17.13% 22.95% 54.53% MSCI EAFE 15.56% 19.17% 33.51% INTERNATIONAL FUNDS AVERAGE 16.25% 20.89% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1994. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index - a market capitalization weighted, unmanaged index of over 1,000 foreign stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the international funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 503 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY INTL VALUE 22.95% 13.26% MSCI EAFE 19.17% 8.62% INTERNATIONAL FUNDS AVERAGE 20.89% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND International Value MS EAFE Index (Net) 00335 MS001 1994/11/01 10000.00 10000.00 1994/11/30 9700.00 9533.02 1994/12/31 9790.00 9592.71 1995/01/31 9440.00 9224.21 1995/02/28 9530.00 9197.73 1995/03/31 10000.00 9771.40 1995/04/30 10170.00 10138.89 1995/05/31 10030.00 10018.03 1995/06/30 10040.00 9842.35 1995/07/31 10830.00 10455.10 1995/08/31 10800.00 10056.27 1995/09/30 10860.00 10252.67 1995/10/31 10630.00 9977.08 1995/11/30 10820.00 10254.68 1995/12/31 11150.86 10667.84 1996/01/31 11253.73 10711.64 1996/02/29 11294.88 10747.85 1996/03/31 11521.18 10976.09 1996/04/30 11912.08 11295.20 1996/05/31 11840.07 11087.35 1996/06/30 11973.80 11149.75 1996/07/31 11562.33 10823.87 1996/08/31 11562.33 10847.59 1996/09/30 11870.93 11135.76 1996/10/31 11654.91 11021.81 1996/11/30 12251.54 11460.35 1996/12/31 12219.78 11312.93 1997/01/31 12198.62 10919.24 1997/02/28 12452.54 11100.50 1997/03/31 12547.75 11142.68 1997/04/30 12568.91 11203.96 1997/05/31 13394.15 11935.25 1997/06/30 14060.68 12595.26 1997/07/31 14409.82 12800.82 1997/08/31 13351.83 11846.52 1997/09/30 14187.64 12511.94 1997/10/31 13193.13 11553.40 1997/11/30 13087.33 11437.87 1997/12/31 13178.62 11539.78 1998/01/31 13581.27 12069.69 1998/02/28 14364.81 12846.37 1998/03/31 15039.52 13244.35 1998/04/30 15453.05 13351.37 IMATRL PRASUN SHR__CHT 19980430 19980506 114255 R00000000000045 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity International Value Fund on November 1, 1994, when the fund started. As the chart shows, by April 30, 1998, the value of the investment would have grown to $15,453 - a 54.53% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International EAFE Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $13,351 - a 33.51% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) INTERNATIONAL VALUE FUND TALK: THE MANAGER'S OVERVIEW An interview with Richard Mace, Portfolio Manager of Fidelity International Value Fund Q. RICK, HOW DID THE FUND PERFORM? A. It did well. For the six months that ended April 30, 1998, the fund had a total return of 17.13%. That beat the 16.25% six-month return of the international funds average tracked by Lipper Analytical Services, and the 15.56% return of the Morgan Stanley Capital International Europe, Australasia and Far East (EAFE) Index. For the 12 months that ended April 30, 1998, the fund returned 22.95%, while the Lipper average and EAFE index returned 20.89% and 19.17%, respectively. Q. WHAT HELPED THE FUND BEAT THE LIPPER AVERAGE AND THE INDEX? A. Almost all of the fund's outperformance in the period was due to stock selection. European financial positions made particularly strong contributions to performance as low interest rates, benign inflation, improving economies and surging securities markets provided a favorable environment for banks and insurers. In addition, merger and acquisition activity within these sectors continued to boost valuations. Particular standouts included companies that were among the fund's 25 largest holdings, such as Lloyds TSB Group in the United Kingdom and Swiss banking companies Credit Suisse and Julius Baer, as well as French bank Societe Generale. Insurers also aided performance and included French companies Axa and Union Assurances Federales and Germany's Allianz, as well as Royal & Sun Alliance Insurance Group in the U.K. Telecommunications stocks also were among the fund's most stellar performers. In addition to the recent merger and consolidation activity, the cellular market in both the U.K. and Italy was particularly strong and fund holdings of Britain's Vodafone Group and Telecom Italia Mobile were among the fund's best performers. Q. LET'S TAKE A CLOSER LOOK AT SOME OF THE NEW MEMBERS OF THE TOP 10 . . . A. I continued to increase the fund's position in Brazilian telephone company Telebras because it appeared to be among the best values in the telecom sector. Specifically, it appeared to be a very cheap stock with excellent growth prospects. BHF is a German bank with an excellent management team that was restructuring and improving the operations of the company. Sankyo Pharmaceutical is a Japanese company that I felt had very bright prospects. The company's share price has declined sharply in the last six months and, as a result, I substantially increased the fund's position there. Philips is a Dutch electronics company that was divesting its non-core assets and improving its return on capital employed by investing in the higher margin, higher return-on-capital businesses. I believed that it was another case of a company with good growth prospects that was cheaply valued. Q. CITE, IF YOU WILL, THE STOCKS THAT HAD THE MOST PROFOUND POSITIVE EFFECTS ON THE FUND'S PERFORMANCE. A. Certainly. I would point to Alcatel Alsthom as a major contributor to performance. This French electronics equipment company has an exceptionally fine management team that was divesting peripheral businesses and non-core assets and focusing on its core, high-return businesses. The company's success in this endeavor has resulted in an enormous increase in free cash flow, enabling it to improve its balance sheet by reducing debt. Also among the fund's top performers for the period was the British-based business services company Rentokil, which provides a wide range of services to businesses worldwide, such as cleaning, maintenance and landscaping. I bought it because it was cheap and its businesses were growing at a very rapid rate. Q. WHAT WERE SOME OF THE PERIOD'S DISAPPOINTMENTS? A. Japanese financial holdings were the biggest detractors from performance. Banks were particularly hard hit as a result of a lack of improvement in the economy and continued concerns about the quality of the banks' assets. Securities brokers were hurt by the equity market's poor performance because their fortunes are highly correlated with the level of market activity. Similarly, real estate company holdings also suffered from the general decline in the domestic economy, despite some signs that real estate prices might be bottoming. Among the fund's financial holdings most hurt by these events were Long-Term Credit Bank, Daiwa Securities and Sumitomo Realty & Development Company. Q. WHICH INDUSTRY SECTORS DID YOU FOCUS ON? A. I generally favored the telecommunications sector. Companies in this industry have been aggressively improving their returns on capital and positioning themselves to better compete at home and abroad through mergers and alliances with others in the field. I also continued to favor European financials, in part because of the on-going restructuring initiatives and improving asset quality of the region's bank and insurance companies. The sector has also been benefiting from improving economies and the low interest-rate environment throughout the region. Q. WHICH SECTORS DID YOU AVOID? A. With the exception of Latin America and South Africa, I have generally avoided the emerging markets, because I could find few situations where the returns seemed to justify the economic, political and currency risks that plagued some of these markets. However, significant additions were made to holdings of Brazilian telephone company Telebras because it appeared to be cheaply priced. This company was the fund's fourth largest position at the end of April. Q. WHAT'S YOUR OUTLOOK GOING FORWARD, RICK? A. I am looking for a continuing improvement in the European economies. However, stock selection will be especially critical. Company earnings must come through as expected in order to justify the lofty stock valuations that the markets have placed on them. If earnings disappoint, we run the risk of a stock correction. In Japan, I am continuing to look for signs of an improvement in the economy and have pinpointed a number of companies that could be early beneficiaries of a turnaround as candidates for purchase. I will also be keeping close watch on the emerging markets where we are beginning to see some significant improvement in valuations. However, unlike our approach to investing in the developed markets, country and regional factors play as much of a role in our decision making as stock selection. In general, emerging markets are more volatile than developed markets. Accordingly, when I make an investment in a stock in an emerging market I expect a higher level of return to compensate shareholders for the higher level of risk there. Up to this point, I have not found many stocks outside of Latin America and South Africa that meet our requirements. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. RICK MACE DEFINES HIS VALUE APPROACH TO INVESTING: "When you refer to the fund's prospectus, it says that the fund `focuses on securities of companies that it believes are undervalued in the marketplace or possess valuable assets.' Most people think of a value stock as one that has a low price-to-earnings ratio (P/E). However, a low P/E isn't a measure of value. It is a measure of what the market is ascribing to a company's earnings, and it might suggest that the company has no growth prospects. A low P/E with no growth doesn't necessarily represent value, so a stock with a P/E of 10 and poor growth prospects probably offers less value than a stock with a P/E of 15 but where earnings are growing at 15% a year. So, one must consider when looking at value that it is not just one dimension, it's not just price-to-earnings or just price-to-book value. That is only one piece of the equation. "Clearly, one pays more for a company that has a better business, or a higher level of operating margins and, certainly, one would generally pay more for a company with a higher return on capital employed if it has brighter growth prospects into the future and if it has a superior management team. All of these functions go into considering what is the real value of a company. So, as one considers the fund and sees that the P/E of the fund is at a certain level, that is just a snap shot of some old historic data. I would like to see investors consider value in the somewhat broader context that I've described." (solid bullet) Four of the fund's top 10 holdings remain from six months ago: Alcatel Alsthom, Novartis, SmithKline Beecham and Total. Three of the companies that fell from this group are still relatively large positions. This relative stability speaks to the fund manager's strategy of making investments without a specific time horizon. Rick Mace aims to purchase undervalued equities with bright business prospects. If those prospects develop as hoped and the valuations remain reasonable, the fund could own the stocks for years. FUND FACTS GOAL: growth of capital by investing mainly in the stocks of foreign companies that own valuable assets or are undervalued in the marketplace FUND NUMBER: 335 TRADING SYMBOL: FIVFX START DATE: November 1, 1994 SIZE: as of April 30, 1998, more than $530 million MANAGER: Richard Mace, since 1994; manager, Fidelity Overseas Fund, since 1996; co-manager, Fidelity Global Balanced Fund, February 1993- December 1993 and 1995-1996; manager, Fidelity Global Balanced Fund, since 1996; Fidelity International Growth & Income Fund, 1994-1996; joined Fidelity in 1987 (checkmark) INTERNATIONAL VALUE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 AUSTRALIA 3.0% UNITED STATES 7.6% ROW: 1, COL: 1, VALUE: 3.0 ROW: 1, COL: 2, VALUE: 12.2 ROW: 1, COL: 3, VALUE: 6.4 ROW: 1, COL: 4, VALUE: 17.3 ROW: 1, COL: 5, VALUE: 7.0 ROW: 1, COL: 6, VALUE: 20.7 ROW: 1, COL: 7, VALUE: 4.6 ROW: 1, COL: 8, VALUE: 6.1 ROW: 1, COL: 9, VALUE: 15.1 ROW: 1, COL: 10, VALUE: 7.6 FRANCE 12.2% UNITED KINGDOM 15.1% GERMANY 6.4% SWITZERLAND 6.1% SWEDEN 4.6% JAPAN 17.3% NETHERLANDS 7.0% OTHER 20.7% AS OF OCTOBER 31, 1997 CANADA 3.2% UNITED STATES 15.1% ROW: 1, COL: 1, VALUE: 3.2 ROW: 1, COL: 2, VALUE: 12.5 ROW: 1, COL: 3, VALUE: 5.0 ROW: 1, COL: 4, VALUE: 16.8 ROW: 1, COL: 5, VALUE: 6.6 ROW: 1, COL: 6, VALUE: 18.2 ROW: 1, COL: 7, VALUE: 7.6 ROW: 1, COL: 8, VALUE: 15.0 ROW: 1, COL: 9, VALUE: 15.1 FRANCE 12.5% UNITED KINGDOM 15.0% GERMANY 5.0% JAPAN 16.8% SWEDEN 7.6% NETHERLANDS 6.6% OTHER 18.2% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS, CLOSED-END INVESTMENT 93.0 86.3 COMPANIES AND EQUITY FUTURES BONDS 0.3 0.4 SHORT-TERM INVESTMENTS 6.7 13.3 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ALCATEL ALSTHOM COMPAGNIE GENERALE 2.0 1.9 D'ELECTRICITE SA (FRANCE, ELECTRICAL EQUIPMENT) PHILIPS ELECTRONICS NV (BEARER) 1.8 0.7 (NETHERLANDS, ELECTRICAL EQUIPMENT) NOVARTIS AG (REG.) 1.8 1.5 (SWITZERLAND, DRUGS & PHARMACEUTICALS) TELEBRAS SPONSORED ADR 1.6 0.3 (BRAZIL, TELEPHONE SERVICES) SANKYO CO. LTD. 1.6 0.6 (JAPAN, DRUGS & PHARMACEUTICALS) UNILEVER PLC ORD. 1.5 0.3 (UNITED KINGDOM, HOUSEHOLD PRODUCTS) SMITHKLINE BEECHAM PLC ORD. 1.5 1.4 (UNITED KINGDOM, DRUGS & PHARMACEUTICALS) BHF BANK AG 1.3 0.7 (GERMANY, BANKS) TOTAL SA CLASS B 1.2 1.4 (FRANCE, OIL & GAS) SHELL TRANSPORT & TRADING CO. 1.1 0.8 PLC (REG.) (UNITED KINGDOM, OIL & GAS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 21.2 15.3 BASIC INDUSTRIES 8.4 9.5 INDUSTRIAL MACHINERY & EQUIPMENT 8.0 5.0 UTILITIES 7.1 5.4 TECHNOLOGY 7.0 5.7 HEALTH 7.0 8.4 DURABLES 6.4 9.2 ENERGY 6.4 8.1 NONDURABLES 5.8 4.5 CONSTRUCTION & REAL ESTATE 4.1 4.0 INTERNATIONAL VALUE INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 88.4% SHARES VALUE (NOTE1) ARGENTINA - 0.7% Bansud SA Class B (a) 173,700 $ 1,632,984 Disco SA sponsored ADR (a) 9,400 373,650 Telecom Argentina Class B sponsored ADR 18,400 662,400 YPF Sociedad Anonima sponsored ADR representing Class D shares 28,600 997,425 3,666,459 AUSTRALIA - 2.8% Australia & New Zealand Banking Group Ltd. 311,900 2,169,706 Broken Hill Proprietary Co. Ltd. (The) 97,400 949,577 CSR Ltd. 92,100 293,316 Colonial Ltd. 118,690 416,570 Commonwealth Bank of Australia (c) 37,700 451,102 David Jones Ltd. 884,900 1,006,496 Leighton Holdings Ltd. 257,400 978,688 National Australia Bank Ltd. (a) 52,800 748,118 National Mutual Holdings Ltd. 222,000 523,769 News Corp. Ltd. 87,642 585,579 QNI Ltd. 4,108,500 2,403,288 Rio Tinto Ltd. 34,300 474,000 Tabcorp Holdings Ltd. 30,300 164,441 Western Mining Holdings Ltd. 427,074 1,515,569 Westpac Banking Corp. 24,100 161,337 Woodside Petroleum Ltd. 276,000 1,799,244 14,640,800 AUSTRIA - 0.2% OMV AG 7,900 1,171,667 BRAZIL - 2.0% Compania Energertica Minas Gerais 15,138,000 734,694 Petrobras PN (Pfd. Reg.) 5,463,000 1,385,397 Telebras sponsored ADR 70,500 8,587,781 10,707,872 CANADA - 2.2% Abitibi-Consolidated, Inc. 14,500 215,329 Alcan Aluminium Ltd. 51,400 1,666,697 Alliance Forest Products, Inc. (a) 13,800 290,765 Alliance Forest Products, Inc. (a)(c) 15,000 316,049 BCE, Inc. 18,000 766,065 Canadian Natural Resources Ltd. (a) 37,500 805,846 Cominco Ltd. 52,800 865,271 CGI Group, Inc. Class A (sub. vtg.) (a) 68,900 1,897,103 Domtar, Inc. 90,700 760,614 Inco Ltd. 19,200 336,112 National Bank of Canada 69,000 1,422,482 Noranda, Inc. 63,500 1,309,095 Renaissance Energy Ltd. (a) 8,900 171,351 Rio Alto Exploration Ltd. (a) 56,200 648,031 St. Laurent Paperboard, Inc. (a)(c) 24,000 326,217 TVI Pacific, Inc. (a) 245,000 13,697 11,810,724 CHILE - 0.1% Santa Isabel SA sponsored ADR 21,800 359,700 DENMARK - 0.7% Den Danske Bank Group AS 8,200 993,693 International Service Systems AS, Series B 24,000 1,296,502 Jyske Bank AS (Reg.) 1,500 174,108 Unidanmark AS Class A 11,800 990,627 3,454,930 SHARES VALUE (NOTE1) FINLAND - 2.4% Cultor OY Ord., Series 2 26,000 $ 1,540,352 Enso OY Class R 295,900 3,147,872 Huhtamaki Ord. 9,000 519,993 Metsa-Serla Ltd. Class B 230,800 2,391,820 Nokia Corp. AB, Series A 34,000 2,282,465 UPM-Kymmene Corp. 73,100 2,192,196 Valmet OY 30,000 495,781 12,570,479 FRANCE - 12.2% Alcatel Alsthom Compagnie Generale d'Electricite SA 58,700 10,640,593 Accor SA 14,100 3,839,173 Axa SA 17,100 2,005,582 Altos SA (a) 4,400 734,613 Cap Gemini Sogeti SA 19,400 2,517,053 Carbonne-Lorraine 2,600 1,064,706 Coflexip sponsored ADR 14,500 1,033,125 Compagnie de Saint Gobain 4,400 732,420 Credit Commercial de France Ord. 16,000 1,275,853 Eramet SA 14,700 737,503 Elf Sanofi SA 9,900 1,198,953 GAN (Groupe des Assurances Nationales) (a) 59,500 1,693,222 Generale des Eaux, Cie 1,000 185,730 Groupe Danone 12,900 3,043,110 LVMH (Moet-Hennessy Louis Vuitton) sponsored ADR 5,600 1,151,724 Lafarge SA (RFD) 375 34,388 Lagardere S.C.A. (Reg.) 25,000 955,229 Michelin SA (Compagnie Generale des Etablissements) Class B 20,456 1,287,612 Nationale Elf Aquitaine 46,300 6,068,727 Pechiney SA Class A 43,092 1,925,699 Peugeot SA Ord. 2,700 468,278 Renault SA Ord. (a) 17,100 792,574 Rhone Poulenc SA Class A 47,484 2,319,968 Royal Canin SA (c) 8,000 482,166 Scor SA 13,500 831,597 Societe Generale Class A 23,800 4,950,179 Total SA Class B 55,582 6,602,065 Unibail (a) 3,200 457,181 Usinor Sacilor 125,700 1,879,392 Union Assurances Federale SA 17,100 2,673,162 Valeo SA 11,000 1,092,782 64,674,359 GERMANY - 4.8% Allianz AG 9,400 3,043,132 BHF Bank AG 167,500 6,948,466 BASF AG 49,100 2,225,480 Bayer AG 29,100 1,298,068 Continental Gummi-Werke AG 14,800 422,351 Daimler-Benz AG Ord. 16,000 1,584,498 Deutsche Bank AG 7,300 578,830 Deutsche Lufthansa AG 50,000 1,183,251 Hoechst AG Ord. 31,400 1,269,008 Mannesmann AG Ord. 5,519 4,566,643 Philipp Holzmann AG (a) 3,100 928,671 Veba AG Ord. 19,000 1,264,269 25,312,667 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE1) HONG KONG - 1.6% Cheung Kong Holdings Ltd. 36,000 $ 239,272 China Telecom (Hong Kong) Ltd. 398,000 768,637 CLP Holdings Ltd. 70,000 336,065 Dairy Farm International Holdings Ltd. 390,000 499,200 Hutchison Whampoa Ltd. Ord. 46,000 284,365 JCG Holdings Ltd. 994,000 455,404 Johnson Electric Holdings Ltd. 264,000 894,367 Li & Fung Ltd. 618,000 1,036,846 New World Development Co. Ltd. 22,000 62,606 Peregrine Investments Holdings Ltd. 400,000 1 Sun Hung Kai Properties Ltd. 20,000 118,733 Vtech Holdings Ltd. 1,094,000 3,840,330 8,535,826 INDONESIA - 0.3% Asia Pulp & Paper Co. Ltd. sponsored ADR 125,000 1,820,313 IRELAND - 1.0% Bank of Ireland, Inc. 94,485 1,927,538 CRH PLC 16,075 227,788 Elan Corp. PLC ADR (a) 9,000 559,125 Smurfit (Jefferson) Group PL (U.K. Exchange) 280,000 1,038,569 Smurfit (Jefferson) Group PLC 439,100 1,601,749 5,354,769 ITALY - 1.0% Assicurazioni Generali Spa 93,500 2,798,618 Credito Italiano Ord. 180,000 941,586 Telecom Italia Spa 221,665 1,668,897 5,409,101 JAPAN - 16.8% Acom Co. Ltd. 45,800 2,410,254 Aiful Corp. (c) 12,000 791,417 Aiwa Co. Ltd. 7,800 231,959 Asahi Breweries Ltd. 69,000 900,260 Banyu Pharmaceutical Co. Ltd. 45,000 579,334 Bridgestone Corp. 39,000 886,731 Canon, Inc. 72,000 1,696,669 Circle K Japan Co. Ltd. 5,500 225,673 Citizen Watch Co. Ltd. Ord. 108,000 723,659 Daiwa House Industry Co. Ltd. 25,000 201,393 Daiwa Securities Co. Ltd. 105,000 395,257 Dainippon Ink & Chemicals, Inc. 72,000 230,378 Fuji Bank Ltd. 120,000 673,066 Fuji International Trust unit sponsored ADR (c) 9 106,841 Fuji Photo Film Co. Ltd. 69,000 2,446,753 Fujitsu Ltd. 53,000 616,488 Fujitec Co. Ltd. 131,000 808,733 Hitachi Ltd. 273,000 1,950,514 Hitachi Maxell Ltd. 94,000 1,783,399 Honda Motor Co. Ltd. 151,000 5,456,804 Ito En Ltd. 36,000 1,048,899 Ito-Yokado Co. Ltd. 37,000 1,908,150 Jafco Co. Ltd. 18,000 597,628 Kao Corp. 67,000 981,103 Long Term Credit Bank of Japan Ltd. (The) 562,000 918,155 Mabuchi Motor Co. 30,500 1,758,931 Matsushita Electric Industrial Co. Ltd. 212,000 3,383,700 SHARES VALUE (NOTE1) Matsushita Communication Industrial Co. Ltd. 49,000 $ 1,442,424 Matsushita Electric Works Co. Ltd. 272,000 2,436,891 Meitec Corp. 81,300 2,662,563 Minebea Co. Ltd. 302,000 3,365,029 Minolta Camera Co. Ltd. 276,000 1,787,013 Mitsubishi Electric Co. Ord. 970,000 2,482,966 Mitsubishi Estate Co. Ltd. 134,000 1,291,323 Mitsubishi Trust & Banking Corp. 158,000 1,498,814 Mitsui Fudosan Co. Ltd. 68,000 618,438 Nintendo Co. Ltd. Ord. 12,500 1,142,481 Nomura Securities Co. Ltd. 105,000 1,276,680 Nichicon Corp. 40,000 433,653 Nichiei Co. Ltd. 12,100 938,302 Omron Corp. 110,000 1,718,426 Orix Corp. 16,000 1,102,202 Rohm Co. Ltd. 17,000 1,912,140 Sakura Bank Ltd. 388,000 1,329,117 Sankyo Co. Ltd. 346,000 8,544,174 Sekisui House Ltd. 93,000 723,975 Sharp Corp. 132,000 1,033,540 Shin-Etsu Chemical Co. Ltd. 40,000 776,962 Sony Corp. 19,000 1,614,116 Shohkoh Fund & Co. Ltd. 1,300 412,046 Sony Music Entertainment Japan, Inc. 46,600 1,817,339 Sumitomo Realty & Development Co. Ltd. 120,000 573,687 Sumitomo Special Metals Co. 9,000 201,242 TDK Corp. 20,000 1,575,005 Takeda Chemical Industries Ltd. 80,000 2,276,680 Takefuji Corp. 26,000 1,360,437 Takefuji Corp. (c) 10,000 523,245 Terumo Corp. 20,000 291,813 THK Co. Ltd. 172,600 1,650,307 Tokio Marine & Fire Insurance Co. Ltd. (The) 59,000 639,639 Tokyo Electron Ltd. 16,000 626,388 Tokyo Seimitsu Co. Ltd. 46,000 1,347,186 Uni Charm Corp. Ord. 31,000 1,166,949 Yamanouchi Pharmaceutical Co. Ltd. 36,000 848,334 89,153,674 LUXEMBOURG - 0.7% Stolt Comex Seaway SA (a) 120,000 3,900,000 MALAYSIA - 0.1% Malayan Banking BHD 5,000 14,735 Oriental Holdings BHD 184,000 384,514 399,249 MEXICO - 0.9% Grupo Elektra SA 258,400 368,795 Grupo Financiero Banamex-Accival Class B (a) 196,000 611,634 Grupo Financiero Bancomer Class B 3,315,000 2,287,553 Grupo Financiero Inbursa SA Class B 91,000 277,544 Telefonos de Mexico SA sponsored ADR representing Ord. Class L shares 24,500 1,387,313 4,932,839 NETHERLANDS - 7.0% Ahold NV 66,043 2,057,821 AKZO Nobel NV 24,400 4,959,889 Beter Bed Holding NV 36,400 1,220,594 Benckiser NV Class B 17,000 991,295 Hagemeyer NV 25,000 1,193,185 ING Groep NV 57,618 3,724,552 Koninklijke Hoogovens NV 33,400 1,503,240 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE1) NETHERLANDS - CONTINUED Nutreco Holding NV 37,700 $ 1,344,364 Philips Electronics NV 33,500 3,015,000 Philips Electronics NV (Bearer) 103,800 9,342,000 Royal Ptt Nederland NV 14,000 722,884 Samas-Groep NV 25,000 1,549,285 Vendex International NV 38,406 2,461,753 VNU Ord. 47,400 1,533,192 Vedior NV 50,000 1,518,374 37,137,428 NEW ZEALAND - 0.1% Air New Zealand Ltd. Class B 102,800 145,160 Sky Network Television Ltd. (a) 77,900 116,470 Telecom Corp. of New Zealand (e) 101,400 271,206 532,836 NORWAY - 0.7% Den Norske Bank AS Class A Free shares 26,300 138,078 NCL Holdings AS (a) 638,111 3,068,129 Schibsted AS, Series B 17,100 325,213 3,531,420 PORTUGAL - 0.9% BPI-SGPS SA (Reg.) 49,400 2,294,367 Banco Pinto & Sotto Mayor SA (Reg.) 45,000 1,131,783 Electricidade de Portugal SA 19,200 500,625 Portugal Telecom SA sponsored ADR 5,000 268,750 Portugal Telecom SA 3,000 161,090 Telecel Comunicacoes Pessoais SA (a) 1,300 233,038 4,589,653 RUSSIA - 0.3% Vimpel Communications sponsored ADR (a) 31,000 1,674,000 SINGAPORE - 0.0% Singapore International Airlines Ltd. 18,000 117,082 SOUTH AFRICA - 0.3% Sasol, Ltd. 173,100 1,746,928 SPAIN - 2.1% Banco Bilbao Vizcaya SA Ord. (Reg.) 40,900 2,102,593 Corporacion Mapfre Compania Internacional de Reaseguros SA (Reg.) 8,400 329,379 Iberdrola SA 29,300 470,706 Mapfre Vida SA 7,400 368,775 Repsol SA Ord. 31,100 1,702,797 Telefonica de Espana SA: Ord. 97,800 4,078,607 sponsored ADR 16,000 1,999,000 11,051,857 SWEDEN - 4.6% ABB AB, Series A 75,000 1,213,639 Astra AB Class A Free shares 163,233 3,346,491 Electrolux AB 15,600 1,448,244 ForeningsSparbanken AB, Series A 33,200 1,035,948 Hemkopskedjan AB, Series B 52,430 713,209 IBS (International Business Systems) AB Class B Free shares (a) 178,800 2,754,990 Mandamus AB rights 6/15/98 (a) 33,200 51,797 Nordbanken Holding AB 147,400 1,083,320 SHARES VALUE (NOTE1) SKF AB Ord. 21,500 $ 432,462 Skandia Foersaekrings AB 16,200 1,125,870 Svenska Handelsbanken 41,400 1,873,665 Swedish Match Co. 957,800 3,309,743 Volvo AB Class B 197,000 5,860,069 24,249,447 SWITZERLAND - 6.1% Adecco SA (Bearer) 1,800 785,319 Credit Suisse Group (Reg.) 26,100 5,737,028 Compagnie Financiere Richemont AG Class A Unit (Bearer) 697 998,168 Holderbank Financiere Glarus AG (Bearer) 100 104,576 Julius Baer Holding AG 2,129 5,870,952 Nestle SA (Reg.) 2,057 3,987,124 Novartis AG (Reg.) 5,637 9,311,770 Swiss Bank Corp. (Reg.) 11,800 4,094,984 Union Bank of Switzeland Ord. (Bearer) 900 1,448,345 32,338,266 UNITED KINGDOM - 15.1% BAT Industries PLC Ord. 149,900 1,412,554 BBA Group PLC 42,134 346,004 Bank of Scotland 163,000 2,001,702 Barclays PLC Ord. 78,000 2,248,061 British Aerospace PLC 111,562 3,724,228 British Petroleum PLC Ord. 292,835 4,621,143 Caradon PLC 696,060 2,250,361 Commercial Union PLC 56,000 1,046,990 Cookson Group PLC 368,800 1,654,473 Courtaulds Textiles PLC 249,600 1,338,672 Devro PLC 85,000 771,158 Dorling Kindersley Holdings PLC, Class L 376,500 1,616,674 Dr Solomons Group PLC sponsored ADR (a) 32,200 957,950 Gallaher Group PLC 188,800 984,195 HSBC Holdings PLC Ord. 121,917 3,843,799 Hazlewood Foods PLC Ord. 200,000 634,904 House of Fraser PLC Class L 273,700 727,104 Inchcape PLC Ord. 159,400 595,903 Johnson Matthey PLC 30,000 303,751 Ladbroke Group PLC Ord. 157,100 862,912 Lloyds TSB Group PLC 357,421 5,347,738 Pearson, PLC 70,000 1,095,878 Perpetual PLC 400 26,733 Pilkington PLC Ord. 780,000 1,635,546 Rentokil Initial PLC 416,200 2,678,978 Rio Tinto PLC (Reg.) 90,500 1,298,116 Royal & Sun Alliance Insurance Group PLC 82,617 922,084 Saatchi & Saatchi PLC 90,000 237,588 Scholl PLC 144,000 902,232 Shell Transport & Trading Co. PLC: (Reg.) 818,300 6,084,110 ADR 24,100 1,070,944 Siebe, PLC 49,700 1,109,398 SmithKline Beecham PLC Ord. 648,200 7,721,880 Somerfield PLC 556,700 3,146,924 Tarmac PLC 360,000 696,222 Tomkins PLC Ord. 19,100 112,331 Unigate PLC 75,000 909,751 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE1) UNITED KINGDOM - CONTINUED Unilever PLC Ord. 727,500 $ 7,742,780 Vodafone Group PLC 440,900 4,825,095 WPP Group PLC (a) 70,500 447,018 Wickes PLC 3,400 19,996 79,973,880 UNITED STATES OF AMERICA - 0.5% Aluminum Co. of America 10,400 806,000 Brio Technology, Inc. 2,000 54,000 D.R. Horton, Inc. 45,200 836,200 Heller Financial, Inc. Class A 200 2,200 Newmont Mining Corp. 8,000 257,500 Transocean Offshore, Inc. 10,000 558,750 2,514,650 VENEZUELA - 0.2% Compania Anonima Nacional Telefonos de Venezuela sponsored ADR 26,800 897,800 TOTAL COMMON STOCKS (Cost $402,997,578) 468,230,675 CLOSED-END INVESTMENT COMPANIES - 1.3% EMERGING MARKETS - 0.6% Asia Tigers Fund, Inc. 120,000 907,500 Scudder New Europe Fund, Inc. 25,000 509,375 Templeton Dragon Fund, Inc. 165,000 1,815,000 3,231,875 GERMANY - 0.2% Emerging Germany Fund, Inc. 10,700 153,144 New Germany Fund, Inc. (The) 60,300 1,077,863 1,231,007 MULTI-NATIONAL - 0.5% European Warrant Fund, Inc. 70,600 1,526,725 Morgan Stanley Asia-Pacific Fund, Inc. 98,000 728,875 2,255,600 PORTUGAL - 0.0% Portugal Fund, Inc. 7,000 157,063 TOTAL CLOSED-END INVESTMENT COMPANIES (Cost $6,689,348) 6,875,545 PREFERRED STOCKS - 2.8% CONVERTIBLE PREFERRED STOCKS - 0.2% UNITED STATES OF AMERICA - 0.2% WBK Trust $3.135 STRYPES 31,300 1,068,113 NONCONVERTIBLE PREFERRED STOCKS - 2.6% AUSTRALIA - 0.2% Sydney Harbour Casino Holdings Ltd. (a) 1,530,101 1,083,993 GERMANY - 1.4% Boss (Hugo) AG 124 227,852 Dyckerhoff AG 6,000 2,064,703 SHARES VALUE (NOTE1) SAP AG (Systeme Anwendungen Produkte) 5,200 $ 2,663,845 Wella AG 2,810 2,597,361 7,553,761 ITALY - 1.0% Telecom Italia: Spa 159,375 839,720 Mobile Spa de Risp 1,150,800 4,142,881 4,982,601 TOTAL NONCONVERTIBLE PREFERRED STOCKS 13,620,355 TOTAL PREFERRED STOCKS (Cost $11,671,562) 14,688,468 GOVERNMENT OBLIGATIONS - 0.3% MOODY'S RATINGS PRINCIPAL (UNAUDITED) AMOUNT ITALY - 0.1% Italian Republic 5%, 6/28/01 Aa3 $ 360,000 623,700 UNITED STATES OF AMERICA - 0.2% U.S. Treasury Notes: 9 1/4%, 8/15/98 Aaa 370,000 374,103 8 7/8%, 11/15/98 Aaa 404,000 411,195 U.S. Treasury Bill yield at date of purchase 4.97%, 7/23/98 (d) Aaa 175,000 173,019 958,317 TOTAL GOVERNMENT OBLIGATIONS (Cost $1,599,551) 1,582,017 CASH EQUIVALENTS - 7.2% SHARES Taxable Central Cash Fund (Cost $38,472,958) (b) 38,472,958 38,472,958 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $461,430,997) $ 529,849,663 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) PURCHASED 36 Nikkei 225 Stock Index Contracts June 98 $ 2,817,000 $ (243,210) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.5% SECURITY TYPE ABBREVIATIONS STRYPES - Structured Yield Product Exchangeable for Common Stock CURRENCY ABBREVIATIONS NZD - New Zealand dollar LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,997,037 or 0.6% of net assets. (d) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $161,500. (e) Purchased on installment basis. Market value reflects only those payments made through 3/31/98. The remaining installment aggregating NZD 420,810 is due on 3/31/99. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $237,261,439 and $179,877,150, respectively, of which long-term U.S. government and government agency obligations aggregated $1,217,641 and $1,366,659, respectively (see Note 3 of Notes to Financial Statements). The market value of futures contracts opened and closed during the period amounted to $5,759,064 and $3,893,776, respectively (see Note 2 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $14,417 for the period (see Note 4 of Notes to Financial Statements). MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.7% Basic Industries 8.4 Cash Equivalents 7.2 Construction & Real Estate 4.1 Durables 6.4 Energy 6.4 Finance 21.2 Government Obligations 0.3 Health 7.0 Holding Companies 0.9 Industrial Machinery & Equipment 8.0 Media & Leisure 3.2 Nondurables 5.8 Precious Metals 0.3 Retail & Wholesale 3.0 Services 2.7 Technology 7.0 Transportation 0.3 Utilities 7.1 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $461,567,016. Net unrealized appreciation aggregated $68,282,647, of which $91,044,141 related to appreciated investment securities and $22,761,494 related to depreciated investment securities. INTERNATIONAL VALUE FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 529,849,663 (COST $461,430,997) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 16,521,407 RECEIVABLE FOR FUND SHARES SOLD 4,469,163 DIVIDENDS RECEIVABLE 1,947,142 INTEREST RECEIVABLE 257,658 RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 31,360 OTHER RECEIVABLES 4,169 TOTAL ASSETS 553,080,562 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 18,960,573 PAYABLE FOR FUND SHARES REDEEMED 2,701,905 ACCRUED MANAGEMENT FEE 352,602 OTHER PAYABLES AND 225,193 ACCRUED EXPENSES TOTAL LIABILITIES 22,240,273 NET ASSETS $ 530,840,289 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 454,268,527 UNDISTRIBUTED NET INVESTMENT INCOME 628,802 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 8,108,981 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 67,833,979 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 37,385,960 $ 530,840,289 SHARES OUTSTANDING NET ASSET VALUE, OFFERING PRICE $14.20 AND REDEMPTION PRICE PER SHARE ($530,840,289 (DIVIDED BY) 37,385,960 SHARES)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 3,652,102 DIVIDENDS INTEREST 748,875 4,400,977 LESS FOREIGN TAXES WITHHELD (399,451) TOTAL INCOME 4,001,526 EXPENSES MANAGEMENT FEE $ 1,541,325 BASIC FEE PERFORMANCE ADJUSTMENT 224,767 TRANSFER AGENT FEES 486,978 ACCOUNTING FEES AND EXPENSES 157,707 NON-INTERESTED TRUSTEES' COMPENSATION 710 CUSTODIAN FEES AND EXPENSES 142,896 REGISTRATION FEES 59,490 AUDIT 20,476 LEGAL 1,076 REPORTS TO SHAREHOLDERS 15,001 MISCELLANEOUS 10,106 TOTAL EXPENSES BEFORE REDUCTIONS 2,660,532 EXPENSE REDUCTIONS (32,738) 2,627,794 NET INVESTMENT INCOME 1,373,732 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 8,171,436 FOREIGN CURRENCY TRANSACTIONS 170,514 FUTURES CONTRACTS (107,426) 8,234,524 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 57,342,957 ASSETS AND LIABILITIES IN (350,479) FOREIGN CURRENCIES FUTURES CONTRACTS (89,561) 56,902,917 NET GAIN (LOSS) 65,137,441 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 66,511,173 OTHER INFORMATION $ 32,695 EXPENSE REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 43 $ 32,738
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 1,373,732 $ 3,148,502 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 8,234,524 18,866,932 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 56,902,917 10,598,158 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 66,511,173 32,613,592 DISTRIBUTIONS TO SHAREHOLDERS (1,833,828) (2,268,604) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (8,557,828) (4,990,927) TOTAL DISTRIBUTIONS (10,391,656) (7,259,531) SHARE TRANSACTIONS 425,199,902 692,644,504 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 9,766,146 7,013,302 COST OF SHARES REDEEMED (362,991,796) (593,130,534) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 71,974,252 106,527,272 TOTAL INCREASE (DECREASE) IN NET ASSETS 128,093,769 131,881,333 NET ASSETS BEGINNING OF PERIOD 402,746,520 270,865,187 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $628,802 AND $3,062,590, RESPECTIVELY) $ 530,840,289 $ 402,746,520 OTHER INFORMATION SHARES SOLD 32,910,235 55,158,934 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 821,375 624,515 REDEEMED (28,637,510) (47,398,321) NET INCREASE (DECREASE) 5,094,100 8,385,128
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 H NET ASSET VALUE, BEGINNING OF PERIOD $ 12.47 $ 11.33 $ 10.63 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .04 D .13 D .16 G .11 D NET REALIZED AND UNREALIZED GAIN (LOSS) 2.03 1.33 .85 .52 TOTAL FROM INVESTMENT OPERATIONS 2.07 1.46 1.01 .63 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.06) (.10) (.01) - FROM NET REALIZED GAIN (.28) (.22) (.30) - TOTAL DISTRIBUTIONS (.34) (.32) (.31) - NET ASSET VALUE, END OF PERIOD $ 14.20 $ 12.47 $ 11.33 $ 10.63 TOTAL RETURN B, C 17.13% 13.20% 9.64% 6.30% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 530,840 $ 402,747 $ 270,865 $ 56,828 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.30% A 1.30% 1.28% 1.72% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.29% A, E 1.28% E 1.26% E 1.72% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .67% A 1.03% 1.74% 1.08% PORTFOLIO TURNOVER RATE 92% A 86% 71% 109% AVERAGE COMMISSION RATE F $ .0061 $ .0133 $ .0264
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.04 PER SHARE. H FOR THE PERIOD NOVEMBER 1, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995.
OVERSEAS PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 APRIL 30, 1998 MONTHS YEAR YEARS YEARS FIDELITY OVERSEAS 17.48% 24.99% 89.56% 139.51% MSCI EAFE 15.56% 19.17% 62.18% 81.79% INTERNATIONAL FUNDS AVERAGE 16.25% 20.89% 80.98% 168.95% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index - a market capitalization weighted, unmanaged index of over 1,000 foreign stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the international funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 503 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 APRIL 30, 1998 YEAR YEARS YEARS FIDELITY OVERSEAS 24.99% 13.64% 9.13% MSCI EAFE 19.17% 10.15% 6.16% INTERNATIONAL FUNDS AVERAGE 20.89% 12.41% 10.01% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Overseas MS EAFE Index (Net) 00094 MS001 1988/04/30 10000.00 10000.00 1988/05/31 9798.61 9679.44 1988/06/30 9519.75 9424.31 1988/07/31 9395.82 9719.98 1988/08/31 9113.09 9088.00 1988/09/30 9453.91 9485.10 1988/10/31 9798.61 10296.67 1988/11/30 10054.22 10910.00 1988/12/31 10029.07 10970.83 1989/01/31 10151.95 11163.85 1989/02/28 10417.55 11221.24 1989/03/31 10326.37 11001.01 1989/04/30 10548.36 11103.04 1989/05/31 10040.96 10499.00 1989/06/30 9747.62 10322.26 1989/07/31 10714.85 11618.46 1989/08/31 10465.11 11095.93 1989/09/30 11024.05 11601.37 1989/10/31 10425.47 11135.26 1989/11/30 11016.12 11695.02 1989/12/31 11727.34 12126.54 1990/01/31 11461.19 11675.33 1990/02/28 11224.15 10860.45 1990/03/31 11594.26 9729.05 1990/04/30 11565.15 9651.84 1990/05/31 12351.13 10753.13 1990/06/30 12571.54 10658.42 1990/07/31 13191.18 10808.55 1990/08/31 11731.50 9758.95 1990/09/30 10429.85 8398.90 1990/10/31 11423.76 9707.61 1990/11/30 11045.32 9134.97 1990/12/31 10953.05 9282.96 1991/01/31 11196.06 9583.21 1991/02/28 11602.55 10610.52 1991/03/31 11222.57 9973.55 1991/04/30 11381.63 10071.49 1991/05/31 11403.72 10176.58 1991/06/30 10687.95 9428.80 1991/07/31 11271.17 9892.05 1991/08/31 11355.12 9691.16 1991/09/30 11854.39 10237.35 1991/10/31 11894.16 10382.47 1991/11/30 11465.58 9897.77 1991/12/31 11896.48 10408.92 1992/01/31 12033.06 10186.59 1992/02/29 11783.45 9821.99 1992/03/31 11538.55 9173.58 1992/04/30 12240.29 9217.19 1992/05/31 12767.76 9834.14 1992/06/30 12466.35 9367.69 1992/07/31 11675.13 9127.94 1992/08/31 11576.23 9700.45 1992/09/30 11095.85 9508.89 1992/10/31 10342.31 9010.11 1992/11/30 10290.51 9094.90 1992/12/31 10533.65 9141.94 1993/01/31 10840.67 9140.81 1993/02/28 11062.98 9416.93 1993/03/31 11814.63 10237.76 1993/04/30 12635.09 11209.35 1993/05/31 12926.22 11446.09 1993/06/30 12619.21 11267.51 1993/07/31 13196.18 11661.92 1993/08/31 13942.54 12291.47 1993/09/30 13820.79 12014.80 1993/10/31 14376.59 12385.07 1993/11/30 13720.22 11302.48 1993/12/31 14752.82 12118.60 1994/01/31 15801.59 13143.17 1994/02/28 15505.78 13106.77 1994/03/31 15059.38 12542.24 1994/04/30 15564.95 13074.40 1994/05/31 15365.95 12999.34 1994/06/30 15161.57 13183.04 1994/07/31 15586.46 13309.82 1994/08/31 15812.35 13624.94 1994/09/30 15376.70 13195.81 1994/10/31 15688.65 13635.23 1994/11/30 15043.25 12979.92 1994/12/31 14940.30 13061.20 1995/01/31 14300.00 12559.44 1995/02/28 14310.95 12523.40 1995/03/31 14737.81 13304.50 1995/04/30 15159.20 13804.86 1995/05/31 15372.64 13640.30 1995/06/30 15487.56 13401.09 1995/07/31 16182.59 14235.39 1995/08/31 15733.83 13692.36 1995/09/30 15952.74 13959.78 1995/10/31 15635.32 13584.54 1995/11/30 15810.45 13962.51 1995/12/31 16293.18 14525.06 1996/01/31 16601.44 14584.69 1996/02/29 16635.07 14634.00 1996/03/31 16881.68 14944.77 1996/04/30 17341.28 15379.26 1996/05/31 17346.88 15096.25 1996/06/30 17475.79 15181.22 1996/07/31 16988.17 14737.51 1996/08/31 17111.48 14769.80 1996/09/30 17604.70 15162.17 1996/10/31 17419.74 15007.02 1996/11/30 18338.93 15604.12 1996/12/31 18427.30 15403.40 1997/01/31 18439.25 14867.36 1997/02/28 18851.53 15114.15 1997/03/31 19018.84 15171.59 1997/04/30 19162.24 15255.03 1997/05/31 20333.36 16250.73 1997/06/30 21390.96 17149.39 1997/07/31 22102.00 17429.28 1997/08/31 20458.84 16129.93 1997/09/30 21922.75 17035.95 1997/10/31 20387.14 15730.82 1997/11/30 20291.54 15573.51 1997/12/31 20439.54 15712.27 1998/01/31 21092.80 16433.78 1998/02/28 22279.98 17491.29 1998/03/31 23297.56 18033.17 1998/04/30 23950.82 18178.88 IMATRL PRASUN SHR__CHT 19980430 19980506 113858 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Overseas Fund on April 30, 1988. As the chart shows, by April 30, 1998, the value of the investment would have grown to $23,951 - a 139.51% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International EAFE Index did over the period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $18,179 - a 81.79% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) OVERSEAS FUND TALK: THE MANAGER'S OVERVIEW An interview with Richard Mace, Portfolio Manager of Fidelity Overseas Fund Q. HOW DID THE FUND PERFORM, RICK? A. It performed well. For the six months that ended April 30, 1998, the fund had a total return of 17.48%, topping the 15.56% return of the Morgan Stanley Capital International Europe, Australasia and Far East (EAFE) Index, and the 16.25% return for the international funds average tracked by Lipper Analytical Services. For the 12 months that ended April 30, 1998, the fund returned 24.99%, compared to 19.17% and 20.89% for the EAFE index and Lipper peer group, respectively. Q. WHAT FACTORS HELPED THE FUND BEAT THE INDEX AND THE LIPPER AVERAGE OVER THE PAST SIX MONTHS? A. Almost all of the fund's outperformance in the period was due to stock selection. European financial positions made particularly strong contributions to performance, as low interest rates, benign inflation, improving economies and surging securities markets provided a favorable environment for banks and insurers. In addition, merger and acquisition activity within this sector continued to boost valuations. Particular standouts included companies that were among the fund's 35 largest holdings, including Swiss banking companies Credit Suisse and Julius Baer, as well as French bank Societe Generale and Germany's BHF Bank. Insurers also aided performance and included Dutch company ING Groep and Sweden's Skandia Foersaekrings, as well as Axa and Union Assurances Federales in France. Telecommunications stocks also were among the fund's most stellar performers. In addition to recent merger and consolidation activity, the cellular market in both the United Kingdom and Italy was particularly strong, and fund holdings of Britain's Vodafone Group and Italy's Telecom Italia and Telecom Italia Mobile were among the fund's best performers. Q. WHICH STOCKS PROVIDED THE BEST PERFORMANCE FOR THE FUND DURING THE PAST SIX MONTHS? A. Alcatel Alsthom was one of the top contributors to performance. This French electronics equipment company has a superb management team that has been concentrating on the divestiture of peripheral businesses and non-core assets, instead aiming its focus on its core, high-return businesses. An enormous increase in free cash flow has resulted from this program, enabling the company to reduce debt and thus improve its balance sheet. Also among the fund's top performers for the period was the British-based business services company Rentokil, which provides a wide range of services to businesses worldwide, such as cleaning, maintenance and landscaping. I bought it because it was cheap and its businesses were growing at a very rapid rate. Q. WHICH INVESTMENTS DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED? A. Japanese financial holdings hurt performance the most. With the Japanese economy remaining stagnant and continued concerns about asset quality, banks were especially hard hit. Securities brokers were hurt by the equity market's poor performance because their fortunes are highly correlated with the level of market activity. Similarly, real estate company holdings also suffered from the general decline in the domestic economy, despite some signs that real estate prices might be bottoming. Among the fund's financial holdings most hurt by these events were Long-Term Credit Bank, Daiwa Securities and Sumitomo Realty & Development Company. Q. RICK, LET'S TAKE A LOOK AT THE FUND'S COUNTRY WEIGHTINGS. A. The fund's country and regional weightings are a result of my stock-picking process. I don't try to pick markets that I feel will outperform. Instead, I try to find good companies with good growth prospects that are selling at reasonable valuations, wherever that takes us. However, looking more closely at the question, the Japanese component of the fund continued to decline over the past six months and at the end of the period remained significantly underweighted in that market relative to the Japanese component in the EAFE index. The decline in the Japanese weighting was due mostly to the effect of changes in the relative valuations elsewhere in the portfolio. Most European positions experienced strong price appreciation, while valuations in the Japanese component declined over the period. Relative to the index, the fund was overweighted in Europe, especially in France, the Netherlands, Ireland, Sweden, Finland and Norway, while it was underweighted in the U.K., Germany, Switzerland, Spain and Italy. Emerging market exposure was modestly increased over the period, with most of the additions centered in Brazil. The fund continued to be underweighted in the Southeast Asian markets, which accounted for much less than 1% of total fund assets. Q. WHAT INDUSTRY SECTORS DID YOU CONCENTRATE ON AND WHAT OTHERS WERE AVOIDED? A. The telecommunications sector was very attractive. Companies in this industry have been aggressively improving their returns on capital and positioning themselves to better compete at home and abroad through mergers and alliances with others in the field. European financials also continued to be favored in part because of on-going restructuring initiatives and improving asset quality within the region's bank and insurance companies. The sector has also been benefiting from improving economies and the low interest-rate environment throughout the region. With the exception of Latin America and South Africa, I have generally avoided the emerging markets as I could find few situations where the returns seemed to justify the economic, political and currency risks that plagued some of these markets. However, significant additions were made to holdings of Brazilian telephone company Telebras, which appeared to be cheaply priced. This company was the fund's 11th largest position at the end of April. Q. LOOKING OUT OVER THE NEAR FUTURE, WHAT'S YOUR OUTLOOK? A. I think the European economies will continue to improve. However, stock selection will be especially critical. Company earnings must come through as expected in order to justify the lofty stock valuations that the markets have placed on them. If earnings disappoint, we run the risk of a stock correction. In Japan, I am continuing to look for signs of an improvement in the economy and have pinpointed a number of companies that could be early beneficiaries of a turnaround as candidates for purchase. I also will be keeping close watch on the emerging markets, where we are beginning to see some significant improvement in valuations. However, unlike my approach to investing in the developed markets, country and regional factors play as much of a role in my decision making in emerging markets as stock selection. In general, emerging markets are more volatile than developed markets. Accordingly, when I make an investment in a stock in an emerging market, I expect a higher level of return to compensate shareholders for the higher level of risk there. Up to this point,I have not found many stocks outside of Latin America and South Africa that meet these criteria. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. RICK MACE ON COUNTRY VERSUS INDUSTRY SELECTION IN THE INVESTMENT PROCESS: "When discussing the investment performance and portfolio positioning of one of our diversified international funds, we often refer to the fund's country and regional weightings relative to an index or peer group. However, what we think is becoming increasingly important in the investment process is the fund's industry weightings. Studies have shown that a stock's performance is becoming increasingly correlated with that of its industry and decreasingly correlated with the performance of its national market. If you look at an auto stock such as Germany's Daimler-Benz - which may be merging with the United States' third-largest automaker, Chrysler - you clearly will see a global enterprise. By the same token, when you look at Japan's Honda Motor Company, you see a company that is more tightly correlated with the world auto market than with the Japanese equity market. "We believe an industry focus is most important when one is looking at a fund's positioning and its variances relative to an index or peer group. We manage our international funds using a matrix that includes both country and industry analysis. Fidelity has both country expertise and industry expertise, but we believe that we add the most value through stock selection that depends more on industry work. "As an example, the fund is underweighted in Germany. This is not indicative of my view of the German market, but a result of the fact that I have found more attractive stocks in other markets in Europe, such as the Netherlands. The economies of the Netherlands and Germany are very tightly integrated, and, with the European Monetary Union coming on line, we think that our analytical focus on industries makes more sense, because the environment is rapidly changing. I firmly believe that global investors are moving, although slowly, toward our style of industry analysis as opposed to country selection." (solid bullet) Seven of the fund's top 10 holdings were top 10 holdings six months ago. This stability is typical of the manager's strategy. He does not have a particular holding period in mind when choosing investments for the fund. Rather, he starts by looking for undervalued stocks of companies with favorable fundamentals. If a company's business prospects continue as hoped and its stock valuation doesn't rise above a reasonable range, the manager tends to hold on to it for some time. This is the kind of careful analytical process Rick Mace uses when selecting stocks. He'll stay with a stock if he thinks it's the right stock to own. FUND FACTS GOAL: long-term growth of capital by investing in equity securities outside the United States FUND NUMBER: 094 TRADING SYMBOL: FOSFX START DATE: December 4, 1984 SIZE: as of April 30, 1998, more than $4.2 billion MANAGER: Richard Mace, since 1996; manager, Fidelity International Value Fund, since 1994; co-manager, Fidelity Global Balanced Fund, February 1993-December 1993 and 1995-1996; manager, Fidelity Global Balanced Fund since 1996; Fidelity International Growth & Income Fund, 1994-1996; joined Fidelity in 1987 (checkmark) OVERSEAS INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 5.7% ROW: 1, COL: 1, VALUE: 13.8 ROW: 1, COL: 2, VALUE: 5.6 ROW: 1, COL: 3, VALUE: 3.0 ROW: 1, COL: 4, VALUE: 17.3 ROW: 1, COL: 5, VALUE: 8.9 ROW: 1, COL: 6, VALUE: 19.1 ROW: 1, COL: 7, VALUE: 5.5 ROW: 1, COL: 8, VALUE: 6.0 ROW: 1, COL: 9, VALUE: 15.1 ROW: 1, COL: 10, VALUE: 5.7 FRANCE 13.8% UNITED KINGDOM 15.1% GERMANY 5.6% ITALY 3.0% SWITZERLAND 6.0% SWEDEN 5.5% JAPAN 17.3% OTHER 19.1% NETHERLANDS 8.9% AS OF OCTOBER 31, 1997 CANADA 3.7% UNITED STATES 9.9% ROW: 1, COL: 1, VALUE: 3.7 ROW: 1, COL: 2, VALUE: 12.1 ROW: 1, COL: 3, VALUE: 4.1 ROW: 1, COL: 4, VALUE: 20.1 ROW: 1, COL: 5, VALUE: 8.5 ROW: 1, COL: 6, VALUE: 15.2 ROW: 1, COL: 7, VALUE: 6.1 ROW: 1, COL: 8, VALUE: 4.9 ROW: 1, COL: 9, VALUE: 15.4 ROW: 1, COL: 10, VALUE: 9.9 FRANCE 12.1% UNITED KINGDOM 15.4% GERMANY 4.1% SWITZERLAND 4.9% JAPAN 20.1% SWEDEN 6.1% OTHER 15.2% NETHERLANDS 8.5% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS, CLOSED-END INVESTMENT 94.9 91.9 COMPANIES AND EQUITY FUTURES BONDS 0.2 0.0 SHORT-TERM INVESTMENTS 4.9 8.1 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ALCATEL ALSTHOM COMPAGNIE GENERALE 2.3 2.1 D'ELECTRICITE SA (FRANCE, ELECTRICAL EQUIPMENT) TOTAL SA CLASS B 2.0 2.3 (FRANCE, OIL & GAS) PHILIPS ELECTRONICS NV (BEARER) 2.0 1.9 (NETHERLANDS, ELECTRICAL EQUIPMENT) NOVARTIS AG (REG.) 1.9 2.0 (SWITZERLAND, DRUG & PHARMACEUTICALS) CREDIT SUISSE GROUP (REG.) 1.4 1.3 (SWITZERLAND, BANKS) SANKYO CO. LTD. 1.4 0.6 (JAPAN, DRUGS & PHARMACEUTICALS) UNILEVER NV ORD. 1.2 1.0 (NETHERLANDS, HOUSEHOLD PRODUCTS) AKZO NOBEL NV 1.2 1.4 (NETHERLANDS, CHEMICALS & PLASTICS) LLOYDS TSB GROUP PLC 1.2 1.2 (UNITED KINGDOM, BANKS) VOLVO AB CLASS B 1.1 1.6 (SWEDEN, AUTOS, TIRES, & ACCESSORIES) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 21.1 16.4 HEALTH 9.1 9.9 BASIC INDUSTRIES 8.6 9.9 UTILITIES 8.4 7.3 ENERGY 7.5 7.6 INDUSTRIAL MACHINERY & EQUIPMENT 7.1 4.9 DURABLES 6.6 9.9 TECHNOLOGY 6.5 6.5 NONDURABLES 5.7 5.0 CONSTRUCTION & REAL ESTATE 3.3 3.1 OVERSEAS INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 91.4% SHARES VALUE (NOTE 1) ARGENTINA - 0.4% Bansud SA Class B (a) 173,800 $ 1,633,924 Telecom Argentina Class B sponsored ADR 196,200 7,063,200 YPF Sociedad Anonima sponsored ADR representing Class D shares 185,700 6,476,288 15,173,412 AUSTRALIA - 2.5% Australia & New Zealand Banking Group Ltd. 2,398,800 16,687,048 Brambles Industries Ltd. 362,300 7,443,424 Broken Hill Proprietary Co. Ltd. (The) 776,800 7,573,217 CSR Ltd. 905,117 2,882,576 Coles Myer Ltd. 1,345,400 6,488,365 Colonial Ltd. 1,441,228 5,058,321 Commonwealth Bank of Australia (c) 390,700 4,674,952 Leighton Holdings Ltd. 790,000 3,003,744 National Australia Bank Ltd. (a) 571,100 8,091,865 National Mutual Holdings Ltd. 1,887,784 4,453,884 News Corp. Ltd. 900,465 6,016,444 QNI Ltd. 2,040,800 1,193,776 Rio Tinto Ltd. 249,500 3,447,900 Western Mining Holdings Ltd. 3,949,012 14,013,966 Westpac Banking Corp. 271,200 1,815,544 Woodside Petroleum Ltd. 714,200 4,655,869 Woolworths Ltd. 2,206,600 7,572,469 105,073,364 AUSTRIA - 0.2% OMV AG 38,300 5,680,361 Voest-Alpine Stahl AG 76,100 3,119,766 8,800,127 BRAZIL - 1.8% Compania Energertica Minas Gerais 287,818,000 13,968,700 Petrobras PN (Pfd. Reg.) 58,797,000 14,910,702 Telebras sponsored ADR 369,400 44,997,538 73,876,940 CANADA - 3.0% Abitibi-Consolidated, Inc. 164,600 2,444,355 Alcan Aluminium Ltd. 514,500 16,683,183 Alliance Forest Products, Inc. (a) 153,000 3,223,698 Alliance Forest Products, Inc. (a)(c) 159,000 3,350,117 BCE, Inc. 480,600 20,453,922 Canadian Pacific Ltd. 53,700 1,576,156 Canadian National Railway Co. 29,600 1,924,791 Canadian Natural Resources Ltd. (a) 336,300 7,226,825 Cominco Ltd. 593,700 9,729,386 Domtar, Inc. 1,001,000 8,394,423 Greenstone Resources Ltd. (a) 268,800 1,634,271 Inco Ltd. 295,700 5,176,481 National Bank of Canada 714,800 14,736,084 Noranda, Inc. 712,800 14,694,853 Renaissance Energy Ltd. (a) 49,600 954,946 Rio Alto Exploration Ltd. (a) 641,700 7,399,315 St. Laurent Paperboard, Inc. (a)(c) 295,900 4,021,982 123,624,788 DENMARK - 0.9% Den Danske Bank Group AS 107,800 13,063,423 International Service Systems AS, Series B 153,700 8,303,013 Jyske Bank AS (Reg.) 13,100 1,520,543 Novo-Nordisk AS Class B 48,100 7,795,217 Unidanmark AS Class A 82,800 6,951,177 37,633,373 SHARES VALUE (NOTE 1) FINLAND - 2.5% Cultor OY, Series 1 109,700 $ 6,478,980 Enso OY Class R 1,479,600 15,740,426 Huhtamaki Ord. 152,200 8,793,654 Metsa-Serla Ltd. Class B 2,004,600 20,774,010 Nokia Corp. AB, Series A 203,600 13,667,938 Outokumpu OY Class A 306,100 4,295,057 Pohjola Class B 148,770 8,240,745 UPM-Kymmene Corp. 607,000 18,203,320 Valmet OY 367,200 6,068,364 102,262,494 FRANCE - 13.8% Alcatel Alsthom Compagnie Generale d'Electricite SA 527,700 95,643,601 Accor SA 65,932 17,952,080 Axa SA 196,665 23,065,951 Atos SA (a) 44,064 7,356,810 Cap Gemini Sogeti SA 183,300 23,782,258 Coflexip sponsored ADR 149,100 10,623,375 Compagnie de Saint Gobain 29,000 4,827,311 Credit Commercial de France Ord. 174,800 13,938,699 Eramet SA 145,938 7,321,750 Elf Sanofi SA 105,600 12,788,836 GAN (Groupe des Assururances Nationales) (a) 622,546 17,716,111 Generale des Eaux, Cie 25,900 4,810,400 Groupe Danone 59,500 14,036,050 LVMH (Moet-Hennessy Louis Vuitton) sponsored ADR 30,000 6,169,948 Lafarge SA 95,100 8,973,636 Lafarge SA (RFD) 7,925 726,738 Lagardere S.C.A. (Reg.) 275,100 10,511,338 Michelin SA (Compagnie Generale des Etablissements) Class B 271,889 17,114,169 Nationale Elf Aquitaine 287,600 37,696,885 Pechiney SA Class A 476,125 21,277,120 Peugeot SA Ord. 27,700 4,804,186 Renault SA Ord. (a) 170,300 7,893,297 Rhone Poulenc SA Class A 628,925 30,727,941 Royal Canin SA (c) 83,400 5,026,584 Scor SA 137,300 8,457,653 Societe Generale Class A 177,500 36,918,349 Total SA Class B 717,490 85,223,914 Unibail (a) 26,228 3,747,168 Usinor Sacilor 864,000 12,918,017 Union Assurances Federale SA 95,500 14,929,064 Valeo SA 72,200 7,172,622 574,151,861 GERMANY - 4.6% Allianz AG 82,900 26,837,831 BHF Bank AG 640,200 26,557,659 BASF AG 440,800 19,979,464 Bayer AG 325,700 14,528,552 Continental Gummi-Werke AG 183,500 5,236,581 Daimler-Benz AG Ord. 159,700 15,815,271 Deutsche Bank AG 67,900 5,383,908 Deutsche Lufthansa AG 525,400 12,433,599 Hoechst AG Ord. 355,700 14,375,358 Mannesmann AG Ord. 40,400 33,428,587 Philipp Holzmann AG (a) 12,600 3,774,598 Veba AG Ord. 179,600 11,950,665 190,302,073 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HONG KONG - 0.7% China Telecom (Hong Kong) Ltd. 4,158,000 $ 8,030,137 CLP Holdings Ltd. 720,000 3,456,669 Dairy Farm International Holdings Ltd. 1,888,000 2,416,640 Hutchison Whampoa Ltd. Ord. 462,000 2,856,011 Johnson Electric Holdings Ltd. 1,353,000 4,583,629 Li & Fung Ltd. 298,000 499,968 National Mutual Asia Ltd. 2,008,000 1,606,711 Peregrine Investments Holdings Ltd. 2,084,000 3 Sun Hung Kai Properties Ltd. 214,000 1,270,439 Vtech Holdings Ltd. 1,072,000 3,763,102 28,483,309 IRELAND - 1.4% Bank of Ireland, Inc. 1,164,449 23,755,305 CRH PLC 266,246 3,772,786 Elan Corp. PLC ADR (a) 93,900 5,833,538 Independent Newspapers PLC 1,609,950 9,683,656 Smurfit (Jefferson) Group PLC (U.K. Exchange) 1,465,700 5,436,539 Smurfit (Jefferson) Group PLC 2,966,300 10,820,469 59,302,293 ITALY - 1.4% Assicurazioni Generali Spa 624,800 18,701,351 Credito Italiano Ord. 2,076,600 10,862,758 Eni Spa 1,367,300 9,156,476 Telecom Italia Spa 383,330 2,886,059 Telecom Italia Mobile Spa 3,209,900 18,377,473 59,984,117 JAPAN - 16.6% Acom Co. Ltd. 205,300 10,804,043 Aiful Corp. (c) 121,000 7,980,124 Aiwa Co. Ltd. 79,900 2,376,096 Asahi Breweries Ltd. 601,000 7,841,393 Bank of Tokyo-Mitsubishi Ltd. 200,000 2,467,909 Banyu Pharmaceutical Co. Ltd. 458,000 5,896,330 Bridgestone Corp. 394,000 8,958,253 Canon, Inc. 691,000 16,283,305 Circle K Japan Co. Ltd. 26,400 1,083,230 Citizen Watch Co. Ltd. Ord. 859,000 5,755,769 Daiwa House Industry Co. Ltd. 216,000 1,740,034 Daiwa Securities Co. Ltd. 1,418,000 5,337,850 Dainippon Ink & Chemicals, Inc. 747,000 2,390,175 Denny's Japan Co. Ltd. 144,000 3,686,053 Fuji Bank Ltd. 930,000 5,216,262 Fuji International Trust unit sponsored ADR (c) 107 1,270,225 Fuji Photo Film Co. Ltd. 780,000 27,658,949 Fujitsu Ltd. 451,000 5,245,963 Fujitec Co. Ltd. 579,000 3,574,478 Hitachi Ltd. 1,807,000 12,910,544 Hitachi Maxell Ltd. 948,000 17,985,770 Honda Motor Co. Ltd. 938,000 33,897,232 Ito-Yokado Co. Ltd. 229,000 11,809,900 Jafco Co. Ltd. 87,000 2,888,537 Kao Corp. 574,000 8,405,270 Long Term Credit Bank of Japan Ltd. (The) 3,928,000 6,417,286 Mabuchi Motor Co. 38,200 2,202,989 Matsushita Electric Industrial Co. Ltd. 1,451,000 23,159,194 Matsushita Communication Industrial Co. Ltd. 175,000 5,151,515 Matsushita Electric Works Co. Ltd. 1,346,000 12,059,025 SHARES VALUE (NOTE 1) Meitec Corp. 105,000 $ 3,438,735 Minebea Co. Ltd. 1,923,000 21,426,990 Minolta Camera Co. Ltd. 1,697,000 10,987,540 Mitsubishi Electric Co. Ord. 2,836,000 7,259,477 Mitsubishi Estate Co. Ltd. 1,257,000 12,113,382 Mitsubishi Heavy Industries Ltd. 736,000 2,715,151 Mitsubishi Trust & Banking Corp. 388,000 3,680,632 Mitsui Fudosan Co. Ltd. 561,000 5,102,112 Nintendo Co. Ltd. Ord. 198,000 18,096,894 Nippon Telegraph & Telephone Corp. Ord. 795 6,942,970 Nomura Securities Co. Ltd. 1,455,000 17,691,134 Nichicon Corp. 208,000 2,254,997 Nichiei Co. Ltd. 65,890 5,109,482 Omron Corp. 1,043,000 16,293,807 Orix Corp. 281,400 19,384,980 Rohm Co. Ltd. 188,000 21,146,019 Sakura Bank Ltd. 3,872,000 13,263,768 Sankyo Co. Ltd. 2,364,000 58,376,961 Sekisui House Ltd. 426,000 3,316,273 Sharp Corp. 426,000 3,335,517 Shin-Etsu Chemical Co. Ltd. 356,000 6,914,963 Sony Corp. 307,200 26,097,711 Shohkoh Fund & Co. Ltd. 13,400 4,247,243 Sony Music Entertainment Japan, Inc. 242,300 9,449,381 Sumitomo Realty & Development Co. Ltd. 1,846,000 8,825,221 Sumitomo Special Metals Co. 96,000 2,146,584 TDK Corp. 209,000 16,458,799 Takeda Chemical Industries Ltd. 1,415,000 40,268,774 Takefuji Corp. 147,500 7,717,862 Takefuji Corp. (c) 108,000 5,651,044 Terumo Corp. 159,000 2,319,910 THK Co. Ltd. 1,016,900 9,723,041 Tokio Marine & Fire Insurance Co. Ltd. (The) 610,000 6,613,213 Toyota Motor Corp. 185,000 4,805,195 Tokyo Electron Ltd. 153,000 5,989,836 Tokyo Seimitsu Co. Ltd. 108,000 3,162,959 Uni Charm Corp. Ord. 146,000 5,495,953 Yamanouchi Pharmaceutical Co. Ltd. 368,000 8,671,861 688,950,074 LUXEMBOURG - 0.1% Stolt Comex Seaway SA (a) 184,300 5,989,750 MALAYSIA - 0.1% Malayan Banking BHD 52,000 153,248 Oriental Holdings BHD 1,994,800 4,168,638 4,321,886 MEXICO - 1.1% Grupo Carso SA de CV Class A-1 295,000 1,855,040 Grupo Elektra SA 1,044,100 1,490,166 Grupo Financiero Bancomer Class B 28,730,000 19,825,458 Grupo Financiero Banamex- Accival Class B (a) 1,949,000 6,082,018 Grupo Financiero Inbursa SA Class B 932,000 2,842,534 Telefonos de Mexico SA sponsored ADR representing Ord. Class L shares 246,800 13,975,050 46,070,266 NETHERLANDS - 8.9% Ahold NV 375,376 11,696,270 AKZO Nobel NV 239,900 48,765,468 Beter Bed Holding NV 167,300 5,610,040 Benckiser NV Class B 169,300 9,872,135 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) NETHERLANDS - CONTINUED Hagemeyer NV 239,300 $ 11,421,163 ING Groep NV 695,729 44,973,431 Koninklijke Hoogovens NV 281,800 12,683,021 VNU Ord. 242,400 7,840,625 Nutreco Holding NV 367,000 13,087,047 Philips Electronics NV (Bearer) 930,700 83,763,000 Royal Dutch Petroleum Co. Ord. 780,500 44,147,024 Royal Ptt Nederland NV 145,700 7,523,161 Unilever NV Ord. 709,000 50,424,947 Vendex International NV 86,000 5,512,439 Vendex International NV (c) 168,800 10,819,764 Vedior NV 138,150 4,195,267 372,334,802 NEW ZEALAND - 0.1% Air New Zealand Ltd. Class B 1,054,400 1,488,879 Sky Network Television Ltd. (a) 731,000 1,092,936 2,581,815 NORWAY - 0.4% Den Norske Bank AS Class A Free shares 301,200 1,581,335 NCL Holdings AS (a) 2,595,000 12,477,131 Schibsted AS, Series B 178,250 3,390,009 17,448,475 NETHERLANDS ANTILLES - 0.1% Schlumberger Ltd. 62,400 5,171,400 PERU - 0.1% Compania de Minas Buenaventura SA Class B sponsored ADR 144,400 2,238,200 PORTUGAL - 0.8% BPI-SGPS SA (Reg.) 411,300 19,102,696 Banco Pinto & Sotto Mayor SA (Reg.) 193,500 4,866,669 Electricidade de Portugal SA 223,300 5,822,370 Portugal Telecom SA 32,000 1,718,290 Telecel Comunicacoes Pessoais SA (a) 13,000 2,330,382 33,840,407 RUSSIA - 0.1% Vimpel Communications sponsored ADR (a) 94,300 5,092,200 SINGAPORE - 0.1% Kim Engineering Holdings Ltd. 4,882,000 1,788,165 Singapore International Airlines Ltd. 190,000 1,235,870 3,024,035 SOUTH AFRICA - 0.3% Amalgamated Banks of South Africa Ltd. 186,500 1,614,599 Gencor Ltd. (Reg.) 302,940 722,356 Sasol, Ltd. 1,076,500 10,864,055 13,201,010 SPAIN - 2.0% Banco Bilbao Vizcaya SA Ord. (Reg.) 439,300 22,583,600 Corporacion Mapfre Compania Internacional de Reaseguros SA (Reg.) 85,179 3,340,024 Iberdrola SA 291,800 4,687,781 Mapfre Vida SA 76,200 3,797,384 Repsol SA Ord. 113,100 6,192,485 Telefonica de Espana SA Ord. 1,025,800 42,779,502 83,380,776 SHARES VALUE (NOTE 1) SWEDEN - 5.5% ABB AB: Series A 564,300 $ 9,131,421 Series B 270,000 4,177,626 Astra AB Class A Free shares 2,108,533 43,227,700 Ericsson (L.M.) Telephone Co. Class B 186,000 9,566,265 Electrolux AB 160,200 14,872,350 ForeningsSparbanken AB, Series A 281,600 8,786,838 Granges AB (Reg.) 32,600 592,681 IBS (International Business Systems) AB Class B Free shares (a) 496,500 7,650,182 Investor AB Class B Free shares 150,000 8,451,957 Mandamus AB rights 6/15/98 (a) 281,600 439,342 Nordbanken Holding AB 1,246,600 9,161,922 SKF AB Ord. 225,600 4,537,831 Skandia Foersaekrings AB 188,100 13,072,606 Svenska Handelsbanken 461,600 20,890,917 Swedish Match Co. 8,140,900 28,131,430 Volvo AB Class B 1,598,300 47,543,902 230,234,970 SWITZERLAND - 6.0% Adecco SA (Bearer) 17,300 7,547,792 Compagnie Financiere Richemont AG Class A Unit (Bearer) 1,100 1,575,301 Credit Suisse Group (Reg.) 267,400 58,777,060 Holderbank Financiere Glarus AG (Bearer) 500 522,880 Julius Baer Holding AG 10,312 28,436,475 Nestle SA (Reg.) 19,429 37,659,622 Novartis AG (Reg.) 46,833 77,363,512 Roche Holding AG 1,026 10,391,214 Swiss Bank Corp. (Reg.) 38,500 13,360,754 Union Bank of Switzerland Ord. (Bearer) 9,850 15,851,329 251,485,939 UNITED KINGDOM - 15.1% BAT Industries PLC Ord. 1,781,900 16,791,400 BBA Group PLC 528,442 4,339,556 Bank of Scotland 686,100 8,425,569 Barclays PLC Ord. 762,600 21,979,123 Barratt Developments PLC 1,542,300 8,258,884 Billiton PLC 1,514,700 4,327,601 Boots Co. PLC Class L (The) 293,000 4,535,629 British Aerospace PLC 764,310 25,514,643 British Petroleum PLC Ord. 2,303,335 36,348,252 British Telecommunications PLC Ord. 864,400 9,373,114 Cable & Wireless PLC Ord. 627,600 7,182,869 Caradon PLC 6,549,290 21,173,841 Commercial Union PLC 325,300 6,081,891 Cookson Group PLC 7,850,962 35,220,185 Courtaulds Textiles PLC 1,034,600 5,548,837 Devro PLC 227,800 2,066,703 Dorling Kindersley Holdings PLC, Class L 337,200 1,447,922Dr Solomons Group PLC sponsored ADR (a) 375,700 11,177,075 English China Clay PLC 363,800 1,498,318 Gallaher Group PLC 2,108,500 10,991,391 Glaxo Wellcome PLC 1,006,300 28,414,410 Hazlewood Foods PLC Ord. 478,400 1,526,697 HSBC Holdings: PLC 648,000 19,055,140 PLC Ord. 376,846 11,881,199 Inchcape PLC Ord. 1,835,000 6,859,992 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - CONTINUED Johnson Matthey PLC 316,100 $ 3,200,528 Ladbroke Group PLC Ord. 2,238,200 12,293,884 Lloyds TSB Group PLC 3,217,296 48,137,228 National Grid Co. PLC 1,007,760 6,499,334 Pearson, PLC 383,100 5,997,582 Perpetual PLC 5,200 347,526 Pilkington PLC Ord. 2,532,200 5,309,654 Rentokil Initial PLC 4,389,900 28,256,720 Rio Tinto PLC (Reg.) 900,000 12,909,436 Royal & Sun Alliance Insurance Group PLC 445,913 4,976,810 Saatchi & Saatchi PLC 866,400 2,287,178 Scholl PLC 684,100 4,286,229 Shell Transport & Trading Co. PLC (Reg.) 4,620,700 34,355,182 Siebe, PLC 516,800 11,535,952 SmithKline Beecham PLC Ord. 3,700,344 44,081,473 Somerfield PLC 2,391,200 13,517,017 Tarmac PLC 1,998,000 3,864,034 Thames Water PLC Ord. 276,300 4,501,010 Tomkins PLC Ord. 339,700 1,997,849 Unigate PLC 605,500 7,344,720 Unilever PLC Ord. 1,960,800 20,868,787 Vodafone Group PLC 3,300,338 36,118,041 WPP Group PLC (a) 795,000 5,040,845 627,747,260 UNITED STATES OF AMERICA - 0.7% Aluminum Co. of America 183,200 14,198,000 Brio Technology, Inc. 1,400 15,400 D.R. Horton, Inc. 286,600 5,302,100 Heller Financial, Inc. Class A 13,400 361,800 Newmont Mining Corp. 83,800 2,697,313 Transocean Offshore, Inc. 98,600 5,509,275 28,083,888 VENEZUELA - 0.1% Compania Anonima Nacional Telefonos de Venezuela sponsored ADR 80,500 2,696,750 TOTAL COMMON STOCKS (Cost $2,811,706,937) 3,802,562,054 CLOSED-END INVESTMENT COMPANIES - 0.5% EMERGING MARKETS - 0.1% Templeton Dragon Fund, Inc. 359,000 3,949,000 GERMANY - 0.3% Emerging Germany Fund, Inc. 134,100 1,919,306 New Germany Fund, Inc. (The) 662,700 11,845,763 13,765,069 MULTI-NATIONAL - 0.1% Morgan Stanley Asia-Pacific Fund, Inc. 341,400 2,539,163 TOTAL CLOSED-END INVESTMENT COMPANIES (Cost $19,953,769) 20,253,232 PREFERRED STOCKS - 2.3% SHARES VALUE (NOTE 1) CONVERTIBLE PREFERRED STOCKS - 0.1% UNITED STATES OF AMERICA - 0.1% WBK Trust $3.135 STRYPES 167,700 $ 5,722,763 NONCONVERTIBLE PREFERRED STOCKS - 2.2% AUSTRALIA - 0.1% Sydney Harbour Casino Holdings Ltd. (a) 2,943,200 2,085,097 GERMANY - 0.7% Boss (Hugo) AG 1,300 2,388,774 SAP AG (Systeme Anwendungen Produkte) 46,800 23,974,609 Wella AG 5,000 4,621,638 30,985,021 ITALY - 1.4% Telecom Italia: Spa 6,286,000 33,119,867 Mobile Spa de Risp 6,799,700 24,478,925 57,598,792 TOTAL NONCONVERTIBLE PREFERRED STOCKS 90,668,910 TOTAL PREFERRED STOCKS (Cost $43,604,177) 96,391,673 GOVERNMENT OBLIGATIONS - 0.2% MOODY'S PRINCIPAL RATINGS AMOUNT ITALY - 0.2% Italian Republic 5%, 6/28/01 Aa3 $ 3,690,000 6,392,925 UNITED STATES OF AMERICA - 0.0% U.S. Treasury Bill, yield at date of purchase 4.97%, 7/23/98 (d) Aaa 1,750,000 1,730,435 TOTAL GOVERNMENT OBLIGATIONS (Cost $7,799,585) 8,123,360 CASH EQUIVALENTS - 5.6% SHARES Taxable Central Cash Fund (Cost $232,869,008) (b) 232,869,008 232,869,008 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $3,115,933,476) $4,160,199,327 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) PURCHASED 370 Nikkei 225 Stock Index Contracts June 98 $ 28,952,500 $(2,499,669) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.7% PREFERRED STOCK ABBREVIATIONS STRYPES - Structured Yield Product Exchangeable for Common Stock LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $42,794,792 or 1.0% of net assets. (d) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $1,657,750. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,078,916,934 and $1,176,181,302, respectively (see Note 3 of Notes to Financial Statements). The market value of futures contracts opened and closed during the period amounted to $59,666,388 and $42,385,888, respectively (see Note 2 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $104,082 for the period (see Note 4 of Notes to Financial Statements). MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.6% Basic Industries 8.6 Cash Equivalents 5.6 Construction & Real Estate 3.3 Durables 6.6 Energy 7.5 Finance 21.1 Government Obligations 0.2 Health 9.1 Holding Companies 1.5 Industrial Machinery & Equipment 7.1 Media & Leisure 2.8 Nondurables 5.7 Precious Metals 0.5 Retail & Wholesale 2.4 Services 1.9 Technology 6.5 Transportation 0.6 Utilities 8.4 100.0% INCOME TAX INFORMATION At April 30, 1998 the aggregate cost of investment securities for income tax purposes was $3,116,822,924. Net unrealized appreciation aggregated $1,043,376,403, of which $1,213,398,411 related to appreciated investment securities and $170,022,008 related to depreciated investment securities. OVERSEAS FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 4,160,199,327 (COST $3,115,933,476) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 55,650,471 RECEIVABLE FOR FUND SHARES SOLD 24,605,975 DIVIDENDS RECEIVABLE 19,249,812 INTEREST RECEIVABLE 989,838 RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 322,090 OTHER RECEIVABLES 52,897 TOTAL ASSETS 4,261,070,410 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 31,246,195 PAYABLE FOR FUND SHARES REDEEMED 10,865,646 ACCRUED MANAGEMENT FEE 3,087,185 OTHER PAYABLES AND 1,778,535 ACCRUED EXPENSES TOTAL LIABILITIES 46,977,561 NET ASSETS $ 4,214,092,849 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 3,102,687,203 DISTRIBUTIONS IN EXCESS OF (6,891,403) NET INVESTMENT INCOME ACCUMULATED UNDISTRIBUTED 76,714,752 NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,041,582,297 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 110,505,105 SHARES OUTSTANDING $ 4,214,092,849 NET ASSET VALUE, OFFERING PRICE $38.13 AND REDEMPTION PRICE PER SHARE ($4,214,092,849 (DIVIDED BY) 110,505,105 SHARES)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 34,778,607 DIVIDENDS INTEREST 6,688,697 41,467,304 LESS FOREIGN TAXES WITHHELD (3,839,163) TOTAL INCOME 37,628,141 EXPENSES MANAGEMENT FEE $ 14,302,388 BASIC FEE PERFORMANCE ADJUSTMENT 3,022,352 TRANSFER AGENT FEES 5,330,172 ACCOUNTING FEES AND EXPENSES 416,872 NON-INTERESTED TRUSTEES' COMPENSATION 3,819 CUSTODIAN FEES AND EXPENSES 1,043,782 REGISTRATION FEES 131,119 AUDIT 43,381 LEGAL 10,710 REPORTS TO SHAREHOLDERS 270,880 MISCELLANEOUS 49,970 TOTAL EXPENSES BEFORE REDUCTIONS 24,625,445 EXPENSE REDUCTIONS (316,639) 24,308,806 NET INVESTMENT INCOME 13,319,335 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 79,228,076 FOREIGN CURRENCY TRANSACTIONS (858,738) FUTURES CONTRACTS (1,270,619) 77,098,719 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 548,678,858 ASSETS AND LIABILITIES IN (298,089) FOREIGN CURRENCIES FUTURES CONTRACTS (677,681) 547,703,088 NET GAIN (LOSS) 624,801,807 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 638,121,142 OTHER INFORMATION $ 172,522 EXPENSE REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 532 TRANSFER AGENT CREDITS 143,585 $ 316,639
SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS OPERATIONS $ 13,319,335 $ 45,608,708 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 77,098,719 255,298,607 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 547,703,088 239,293,026 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 638,121,142 540,200,341 DISTRIBUTIONS TO SHAREHOLDERS (29,950,699) (36,606,761) FROM NET INVESTMENT INCOME IN EXCESS OF NET INVESTMENT INCOME (6,891,403) - FROM NET REALIZED GAIN (145,109,412) (161,278,875) TOTAL DISTRIBUTIONS (181,951,514) (197,885,636) SHARE TRANSACTIONS 1,906,859,135 4,490,417,585 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 176,077,750 192,007,203 COST OF SHARES REDEEMED (2,102,465,903) (4,361,912,739) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (19,529,018) 320,512,049 TOTAL INCREASE (DECREASE) IN NET ASSETS 436,640,610 662,826,754 NET ASSETS BEGINNING OF PERIOD 3,777,452,239 3,114,625,485 END OF PERIOD (INCLUDING UNDER (OVER) DISTRIBUTION OF NET INVESTMENT INCOME OF $(6,891,403) AND $41,157,042, $ 4,214,092,849 $ 3,777,452,239 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 55,367,465 132,727,973 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 5,371,502 6,343,151 REDEEMED (60,953,917) (128,555,588) NET INCREASE (DECREASE) (214,950) 10,515,536
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 34.12 $ 31.08 $ 28.57 $ 29.17 $ 27.16 $ 21.96 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .12 D .43 D .48 I .31 .18 .27 NET REALIZED AND UNREALIZED GAIN (LOSS) 5.57 4.61 2.72 (.44) 2.26 7.40 TOTAL FROM INVESTMENT OPERATIONS 5.69 5.04 3.20 (.13) 2.44 7.67 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.28) (.37) (.34) (.02) (.15) (.37) IN EXCESS OF NET INVESTMENT INCOME (.06) - - - (.17) - FROM NET REALIZED GAIN (1.34) (1.63) (.35) (.45) (.11) (2.10) F TOTAL DISTRIBUTIONS (1.68) (2.00) (.69) (.47) (.43) (2.47) NET ASSET VALUE, END OF PERIOD $ 38.13 $ 34.12 $ 31.08 $ 28.57 $ 29.17 $ 27.16 TOTAL RETURN B, C 17.48% 17.03% 11.41% (.34)% 9.13% E 39.01% E RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $4,214,093 $3,777,452 $3,114,625 $2,276,306 $2,283,211 $1,490,666 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.30% A 1.23% 1.14% 1.05% 1.24% 1.27% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.29% A, G 1.20% G 1.12% G 1.05% 1.24% 1.27% EXPENSE REDUCTIONS RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .70% A 1.28% 1.74% 1.78% .90% 1.00% PORTFOLIO TURNOVER RATE 61% A 68% 82% 49% 49% 64% AVERAGE COMMISSION RATE H $ .0077 $ .0109 $ .0134 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E TOTAL RETURNS DO NOT INCLUDE ONE TIME SALES CHARGE. F INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. I INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.08 PER SHARE.
WORLDWIDE PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY WORLDWIDE 19.73% 31.11% 109.75% 145.05% MSCI WORLD 18.86% 29.04% 107.45% 134.47% GLOBAL FUNDS AVERAGE 16.66% 27.18% 104.18% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on May 30, 1990. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International World Index - a market capitalization weighted equity index of over 1,500 stocks traded in 22 world markets. To measure how the fund's performance stacked up against its peers, you can compare it to the global funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 214 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY WORLDWIDE 31.11% 15.97% 11.98% MSCI WORLD 29.04% 15.71% 11.36% GLOBAL FUNDS AVERAGE 27.18% 15.07% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Worldwide MS World Index (Net) 00318 MS004 1990/05/30 10000.00 10000.00 1990/05/31 10030.00 9976.64 1990/06/30 10290.00 9902.62 1990/07/31 10570.00 9989.88 1990/08/31 9380.00 9051.77 1990/09/30 8450.00 8094.23 1990/10/31 8950.00 8846.73 1990/11/30 8950.00 8698.31 1990/12/31 8898.23 8877.31 1991/01/31 9150.44 9198.82 1991/02/28 9654.88 10047.22 1991/03/31 9321.95 9748.02 1991/04/30 9412.75 9821.21 1991/05/31 9483.37 10040.73 1991/06/30 8807.43 9417.84 1991/07/31 9352.22 9859.59 1991/08/31 9493.46 9825.22 1991/09/30 9654.88 10079.83 1991/10/31 9695.23 10240.21 1991/11/30 9180.71 9790.88 1991/12/31 9599.06 10500.46 1992/01/31 9701.07 10302.97 1992/02/29 9996.89 10122.11 1992/03/31 9762.27 9642.19 1992/04/30 10190.71 9773.45 1992/05/31 10619.15 10159.10 1992/06/30 10251.92 9815.63 1992/07/31 10149.91 9837.48 1992/08/31 10007.10 10073.46 1992/09/30 10007.10 9977.88 1992/10/31 9823.48 9704.42 1992/11/30 9976.49 9874.98 1992/12/31 10194.86 9951.68 1993/01/31 10530.15 9981.98 1993/02/28 10781.62 10215.46 1993/03/31 11399.81 10804.71 1993/04/30 11682.71 11302.49 1993/05/31 12049.43 11559.98 1993/06/30 11923.70 11460.02 1993/07/31 12185.64 11693.15 1993/08/31 12950.52 12226.26 1993/09/30 12814.31 11997.44 1993/10/31 13369.63 12325.16 1993/11/30 13128.64 11625.06 1993/12/31 13920.64 12191.05 1994/01/31 14914.21 12992.28 1994/02/28 14689.86 12821.27 1994/03/31 14134.32 12265.65 1994/04/30 14625.76 12641.94 1994/05/31 14604.39 12671.61 1994/06/30 14305.25 12633.52 1994/07/31 14743.28 12870.80 1994/08/31 14989.00 13255.48 1994/09/30 14700.54 12904.26 1994/10/31 14914.21 13268.36 1994/11/30 14401.40 12689.97 1994/12/31 14332.82 12809.88 1995/01/31 14253.69 12614.52 1995/02/28 14423.25 12795.36 1995/03/31 14502.37 13408.98 1995/04/30 14864.08 13873.19 1995/05/31 15011.03 13988.72 1995/06/30 15214.49 13981.28 1995/07/31 15836.18 14677.67 1995/08/31 15440.56 14347.51 1995/09/30 15587.50 14762.30 1995/10/31 15056.24 14526.70 1995/11/30 15101.46 15027.93 1995/12/31 15363.09 15464.12 1996/01/31 15786.03 15740.67 1996/02/29 15991.79 15833.30 1996/03/31 16266.13 16093.49 1996/04/30 16746.23 16468.62 1996/05/31 17043.43 16479.56 1996/06/30 17032.00 16559.58 1996/07/31 16414.73 15971.03 1996/08/31 16849.10 16151.29 1996/09/30 17169.17 16780.32 1996/10/31 17352.06 16894.13 1996/11/30 18152.22 17837.53 1996/12/31 18239.31 17548.51 1997/01/31 18464.49 17756.70 1997/02/28 18974.10 17957.61 1997/03/31 18725.22 17599.05 1997/04/30 18689.67 18170.96 1997/05/31 19791.85 19289.22 1997/06/30 20834.77 20247.97 1997/07/31 21699.92 21177.22 1997/08/31 20538.49 19757.23 1997/09/30 22150.28 20827.25 1997/10/31 20467.38 19727.72 1997/11/30 20064.43 20073.46 1997/12/31 20441.89 20314.75 1998/01/31 20762.29 20877.50 1998/02/28 22223.34 22286.37 1998/03/31 23633.13 23224.02 1998/04/30 24504.63 23447.48 IMATRL PRASUN SHR__CHT 19980430 19980506 114241 R00000000000099 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Worldwide Fund on May 30, 1990, when the fund started. As the chart shows, by April 30, 1998, the value of the investment would have grown to $24,505 - a 145.05% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International World Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $23,447 - a 134.47% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) WORLDWIDE FUND TALK: THE MANAGER'S OVERVIEW An Interview with Penny Dobkin, Portfolio Manager of Fidelity Worldwide Fund Q. HOW DID THE FUND PERFORM, PENNY? A. Quite well. For the six-month and one-year periods that ended April 30, 1998, the fund returned 19.73% and 31.11%, respectively. The global funds average tracked by Lipper Analytical Services returned 16.66% and 27.18% over the same periods, while the Morgan Stanley Capital International World Index returned 18.86% for the past six months and 29.04% over the past year. Q. WHY DID THE FUND OUTPERFORM THE INDEX OVER THE PAST SIX MONTHS? A. Probably the most important reason was the fund's overweighting versus the index in Europe, the best-performing region in the world during this period. On the other hand, the fund remained underweighted in Japan - which continued to turn in a poor performance - relative to the index over the period. Another reason the fund outperformed was that it had a handful of extremely well-performing stocks that the index did not hold. For example, South African bank Amalgamated Banks of South Africa has been a stellar performer in 1998, benefiting from interest rate declines in South Africa plus a bounce in numerous emerging markets, including South Africa. Another fund holding, Russian cellular company Vimpel Communications saw phenomenal growth during the period. Its valuation compared with the world average for cellular stocks was extremely cheap, and it benefited from very low cellular phone penetration in Russia, which gives the company real growth potential. In addition, Mexican bank Grupo Financiero Bancomer outperformed as that country's economy continued to look fairly strong. The fund also benefited from a larger weighting than the index in some top-performing stocks, including French defense electronics company Alcatel Alsthom and Netherlands'-based Philips Electronics. Q. YOU ALSO BEAT YOUR PEER GROUP OVER THE SAME PERIOD . . . A. Yes, for pretty much the same reasons. As we just discussed, the fund was overweighted versus the index in Europe. And, while other funds in the peer group were overweighted versus the index as well, they were not as overweighted as I was. The fund also was underweighted versus its competitors in the dragging Japanese market. Q. HOW WOULD YOU DESCRIBE THE OVERALL WORLDWIDE INVESTMENT ENVIRONMENT IN THE PAST SIX MONTHS? A. Clearly, Europe was at the top of the heap, with only companies involved with base metals and chemicals - what we call hard durables - faltering. The U.S. market also performed fairly well. During the period, Japan slowed from barely a crawl to being almost comatose. Southeast Asia and South Korea were a roller coaster ride, looking good in January and February, then giving it all back in March and April. On the other side of the world, most Latin American holdings consistently underperformed during the past six months. In terms of overall emerging market performance, there were no real standouts during the period except Egypt and Greece, where the fund did not have any holdings. Q. WHY DID EUROPE DO SO WELL? A. There were several main factors. European companies in general - and banks specifically - greatly benefited from a drop in interest rates. And many companies continued to benefit from corporate restructuring measures that they have been taking over the past few years to improve their profitability. In addition, many exporting companies in Europe got a boost from the strong dollar; it makes their products cheaper. For the first time ever, European markets did not move on the strength of inflows from outside investors, but on the strength of domestic investors. This trend began in 1996, when many European governments' social security systems began looking less sound and company pensions were cut. As a result, more and more Europeans began investing in stocks, bonds and mutual funds to build their retirement savings. Q. YOU MENTIONED THAT EUROPEAN BANKS GOT A BOOST FROM FALLING INTEREST RATES. HOW DID THEY DO OVERALL? A. Very well. They definitely benefited from lower interest rates, but they also were helped by the rise in local mutual fund activity that we just discussed. Banks in Europe are universal, which means that they have asset-management and investment-banking functions as well as lending businesses. So, if European investors want to buy mutual funds, stocks or bonds, they go to their local bank. As a result, banks are considered the preeminent beneficiaries of all capital market activity on the European continent. Top-10 holding Swiss bank Julius Baer was a good example of a bank that benefited in this environment. Q. WHAT WERE SOME OF THE FUND'S STRONGEST-PERFORMING STOCKS OVER THE PERIOD? A. As previously mentioned, the fund's top two holdings - Alcatel Alsthom and Philips Electronics - continued to greatly benefit from restructuring measures, and, compared to their counterparts worldwide, they were considerably cheaper. The Italian market - probably the strongest market in the world during the period with the exception of Spain - boosted the performance of another top-10 holding, Telecom Italia. By world standards for fixed-line telephone companies, Telecom Italia was about the cheapest in world, and it beat everyone in the market. Societe Generale D'Enterprises, a French construction company, was helped by a greatly improving French economy. As France came out of its doldrums, property and construction companies benefited from an increased demand for housing. Q. DID YOU HAVE ANY REGRETS OVER THE PERIOD? A. Sure. For the most part, they were regrets about missed opportunities. For example, the fund missed out on a couple of top-performing European telecommunications companies, specifically Vodafone and Orange in the U.K. I didn't appreciate just how much subscriber growth would accelerate when these companies launched prepaid phone cards. I also wish I had owned French bank Societe Generale. I thought this bank would be hurt by its South Korean exposure, but Korea improved somewhat and the strong financial environment and growing French market helped the bank turn in a solid performance. Q. ANYTHING ELSE? A. Yes. I was greatly disappointed by the failure of the U.S. government and tobacco companies to put together tobacco legislation. This negatively affected the performance of one of the fund's largest U.S. holdings, Philip Morris. As I've mentioned in previous reports, it is widely believed that any legislation would hardly put a dent in the company's value because its stock is worth so much more than any settlement. Therefore, legislation is expected to boost the stock's performance. Q. PENNY, WHAT'S THE OUTLOOK FOR THE FUND? A. I expect Europe to continue to look strong and emerging markets overall to continue to look weak, but other markets are more difficult to forecast. The big question is will the Japanese market recover. I don't foresee this in the short term, but the state of the Japanese economy could change very quickly. For example, if the government announced that it was cutting corporate and individual taxes, the economy could easily take off. In terms of other world markets, I will be keeping a close eye on Southeast Asia and looking for buying opportunities there. It is still unclear whether Southeast Asia is experiencing a short-term or long-term cycle of underperformance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PENNY DOBKIN ON THE ROLE EMERGING MARKETS PLAY IN THE WORLDWIDE FUND: "Before one can talk about emerging markets, one has to define them in the context of a global fund like this one, which is compared to the MSCI World Index. By this definition, emerging markets don't include Hong Kong, Singapore or Malaysia because they are part of the index. However, emerging markets would include most of Southeast Asia, Latin America, Eastern Europe, the Indian subcontinent, the Middle East and Africa. "I don't foresee a time when the fund would have a significant investment in all emerging markets, as many funds did in 1993 when many emerging markets went up at the same time. I am more likely to concentrate on one or two markets at any given time. If this fund is going to have a significant weighting in emerging markets - which means about 20% of its assets - I would have to believe that there was a huge turnaround starting to happen economically in a particular emerging market. "I believe you can't invest in an emerging market until you are completely comfortable that its currency has stabilized. That's because many companies in emerging markets have offshore debt, usually dollar- or deutsche mark-based. And, when an emerging market country's currency is officially devalued or depreciated by financial markets, then companies there have to spend a lot more of their earnings and cash flow paying off debt. The problem for many of these companies is that foreign financing has been much cheaper in terms of basic interest rates than local financing. So, there has been tremendous incentive for companies to use offshore financing. "Another rule I tend to follow with emerging markets is to stick with larger, more liquid companies - those you can sell easily when the market drops. There's no point in being a brilliant stock picker of small-capitalization companies if you can't sell the stocks when the economy turns for the worse. I think it will be years before small-cap and mid-cap companies outperform large-cap ones in emerging markets. "I also try to focus on choosing well-performing industries, not just targeting the right countries. In the mid-90s, if you got the right emerging market, you could choose just about any industry. Now, I think people are much more judicious about what industries they invest in. For instance, if consumption trails a country's overall economic growth, that country's retailers will probably not perform well, even in a fairly strong economy." FUND FACTS GOAL: long-term growth of capital by investing mainly in common stocks from around the world FUND NUMBER: 318 TRADING SYMBOL: FWWFX START DATE: May 30, 1990 SIZE: as of April 30, 1998, more than $1.3 billion MANAGER: Penelope Dobkin, since inception; manager, Fidelity Europe Fund, 1986-1990; Fidelity United Kingdom Fund, 1987-1989; Fidelity Select Financial Services Portfolio, 1983-1986; joined Fidelity in 1980 (checkmark) WORLDWIDE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 CANADA 4.6% ROW: 1, COL: 1, VALUE: 4.6 ROW: 1, COL: 2, VALUE: 5.8 ROW: 1, COL: 3, VALUE: 10.1 ROW: 1, COL: 4, VALUE: 4.1 ROW: 1, COL: 5, VALUE: 5.5 ROW: 1, COL: 6, VALUE: 6.9 ROW: 1, COL: 7, VALUE: 21.7 ROW: 1, COL: 8, VALUE: 5.0 ROW: 1, COL: 9, VALUE: 8.6 ROW: 1, COL: 10, VALUE: 27.7 FINLAND 5.8% UNITED STATES 27.7% FRANCE 10.1% ITALY 4.1% UNITED KINGDOM 8.6% JAPAN 5.5% SWITZERLAND 5.0% NETHERLANDS 6.9% OTHER 21.7% AS OF OCTOBER 31, 1997 CANADA 5.8% ROW: 1, COL: 1, VALUE: 23.8 ROW: 1, COL: 2, VALUE: 7.2 ROW: 1, COL: 3, VALUE: 4.3 ROW: 1, COL: 4, VALUE: 3.6 ROW: 1, COL: 5, VALUE: 23.5 ROW: 1, COL: 6, VALUE: 7.6 ROW: 1, COL: 7, VALUE: 9.800000000000001 ROW: 1, COL: 8, VALUE: 8.800000000000001 ROW: 1, COL: 9, VALUE: 5.6 ROW: 1, COL: 10, VALUE: 5.8 FINLAND 5.6% UNITED STATES 23.8% FRANCE 8.8% JAPAN 9.8% UNITED KINGDOM 7.2% SWITZERLAND 4.3% NETHERLANDS 7.6% TURKEY 3.6% OTHER 23.5% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 95.9 94.5 SHORT-TERM INVESTMENTS 4.1 5.5 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ALCATEL ALSTHOM COMPAGNIE GENERALE 2.2 1.3 D'ELECTRICITE SA SPONSORED ADR (FRANCE, ELECTRICAL EQUIPMENT) PHILIPS ELECTRONICS NV (BEARER) 2.1 1.7 (NETHERLANDS, ELECTRICAL EQUIPMENT) GRUPO FINANCIERO BANCOMER SA DE CV 1.6 1.2 SPONSORED ADR, SERIES C (MEXICO, BANKS) TELECOM ITALIA SPA 1.5 0.6 (ITALY, TELEPHONE SERVICES) BCE, INC. 1.5 1.4 (CANADA, TELEPHONE SERVICES) PORSCHE AG 1.5 0.0 (GERMANY, AUTOS, TIRES & ACCESSORIES) JULIUS BAER HOLDING AG 1.3 0.8 (SWITZERLAND, BANKS) ICELAND GROUP PLC 1.3 0.0 (UNITED KINGDOM, GROCERY STORES) (SGE) SOCIETE GENERALE D'ENTREPRISES SA 1.2 0.6 (FRANCE, CONSTRUCTION) CIBA SPECIALTY CHEMICALS AG 1.2 1.4 (SWITZERLAND, CHEMICALS & PLASTICS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 17.5 14.6 BASIC INDUSTRIES 12.9 18.6 DURABLES 8.7 7.7 CONSTRUCTION & REAL ESTATE 7.6 6.0 UTILITIES 7.4 6.5 NONDURABLES 6.9 6.9 RETAIL & WHOLESALE 6.8 6.2 INDUSTRIAL MACHINERY & EQUIPMENT 6.2 8.3 MEDIA & LEISURE 5.3 5.5 ENERGY 4.6 0.7 WORLDWIDE FUND INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 89.7% SHARES VALUE (NOTE 1) ARGENTINA - 0.3% Bansud SA Class B (a) 430,000 $ 4,042,505 AUSTRIA - 0.4% OMV AG 33,621 4,986,408 BERMUDA - 0.4% Terra Nova (Bermuda) Holdings Ltd. 174,300 5,337,938 BRAZIL - 1.9% Companhia Paranaense de Energia-Copel Class B 60,000 855,000 Rossi Residencial SA 4,800,000 7,345,547 Telebras sponsored ADR 81,500 9,927,719 Telesp PN (Pfd. Reg.) 20,034,511 6,815,116 24,943,382 CANADA - 4.6% BCE, Inc. 468,000 19,917,677 Domtar, Inc. 565,100 4,738,950 Edperbrascan Corp. Ltd., Class A (vtg.) 324,900 6,629,917 Falconbridge Ltd. 590,000 9,070,897 Imasco Ltd. 300,000 11,289,703 National Bank of Canada 464,300 9,571,858 61,219,002 FINLAND - 5.8% Cultor OY Ord., Series 2 165,000 9,775,312 Enso OY Class R 1,000,000 10,638,298 Huhtamaki Ord. 190,000 10,977,623 Merita Ltd., Series A 800,000 5,341,159 Metsa-Serla Ltd. Class B 1,400,000 14,508,437 Raisio Group PLC 56,000 10,271,460 UPM-Kymmene Corp. 475,000 14,244,773 75,757,062 FRANCE - 10.1% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 813,900 29,503,866 Accor SA 30,000 8,168,453 Credit Commercial de France Ord. 118,400 9,441,316 Eramet SA 128,374 6,440,560 Galeries Lafayette SA 15,700 13,771,243 Lagardere S.C.A. (Reg.) 385,000 14,710,524 Metaleurop SA (a) 522,665 5,843,567 Pechiney SA Class A 189,959 8,488,906 Societe Fonciere Lyonnaise SA 86,000 13,158,236 (SGE) Societe Generale d'Entreprises SA (a) 422,620 16,463,891 Total SA Class B 59,000 7,008,057 132,998,619 GERMANY - 0.6% (BMW) Muenchen Bayerische Motorenwerke AG 5,700 6,417,618 Kamps AG (a) 65,500 1,841,834 8,259,452 HONG KONG - 0.3% Dairy Farm International Holdings Ltd. 2,500,000 3,200,000 Sime Darby Hongkong Ltd. 836,000 342,557 3,542,557 IRELAND - 1.6% Independent Newspapers PLC 1,668,800 10,037,632 Smurfit (Jefferson) Group PLC 2,800,000 10,385,693 20,423,325 SHARES VALUE (NOTE 1) ISRAEL - 0.3% Blue Square-Israel Ltd. sponsored ADR (a) 265,700 $ 4,251,200 ITALY - 1.4% Credito Italiano Ord. 2,253,100 11,786,035 Saipem Spa Ord. (a) 1,090,000 6,242,980 18,029,015 JAPAN - 5.5% Aiful Corp. (c) 91,000 6,001,581 Honda Motor Co. Ltd. 194,000 7,010,728 Minebea Co. Ltd. 865,000 9,638,246 Minolta Camera Co. Ltd. 859,000 5,561,754 Nomura Securities Co. Ltd. 581,000 7,064,295 Nichicon Corp. 360,000 3,902,880 Orix Corp. 55,000 3,788,820 Shohkoh Fund & Co. Ltd. 28,700 9,096,706 Takefuji Corp. 41,500 2,171,466 Takefuji Corp. (c) 40,000 2,092,979 THK Co. Ltd. 1,031,100 9,858,814 Tokyo Electron Ltd. 155,000 6,068,135 72,256,404 MEXICO - 3.3% Grupo Financiero Banamex- Accival Class B (a) 4,690,000 14,635,539 Grupo Financiero Bancomer SA de CV sponsored ADR, Series C (a)(c) 1,579,000 21,711,250 Grupo Financiero Inbursa SA Class B 2,280,000 6,953,839 43,300,628 NETHERLANDS - 6.5% AKZO Nobel NV 49,400 10,041,743 Benckiser NV Class B 213,120 12,427,345 Hagemeyer NV 112,000 5,345,467 New Holland NV 394,900 9,675,050 Philips Electronics NV 60,000 5,400,000 Philips Electronics NV (Bearer) 302,500 27,225,000 Samas-Groep NV (d) 243,613 15,097,042 85,211,647 NORWAY - 1.0% Schibsted AS, Series B 715,200 13,601,875 PORTUGAL - 0.5% BPI-SGPS SA (Reg.) 137,600 6,390,788 RUSSIA - 1.1% Vimpel Communications sponsored ADR 266,600 14,396,400 SINGAPORE - 0.2% Wing Tai Holdings Ltd. 2,563,000 2,087,951 SOUTH AFRICA - 1.5% Amalgamated Banks of South Africa Ltd. 665,500 5,761,477 Orion Selections Holdings Ltd. 1,500,000 4,452,360 Sasol, Ltd. 916,400 9,248,323 19,462,160 SPAIN - 1.3% Banco De Valencia SA (Reg.) 182,400 5,382,119 Catalana Occidente SA 88,500 6,070,030 Mapfre Vida SA 125,000 6,229,304 17,681,453 SWEDEN - 3.5% Astra AB Class A Free shares 210,000 4,305,276 BTL AB, Series B 1,600,000 9,139,203 Castellum AB 861,400 10,218,268 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SWEDEN - CONTINUED Fastighets AB Tornet 350,000 $ 5,302,620 Hemkopskedjan AB, Series B 359,000 4,883,504 Volvo AB Class B 435,000 12,939,747 46,788,618 SWITZERLAND - 5.0% Banque Cantonale Vaudoise (Bearer) 17,100 7,403,584 Ciba Specialty Chemicals AG (a) 135,000 16,320,855 Credit Suisse Group (Reg.) 25,000 5,495,237 Helvetia Patria Holdings (Reg.) 3,200 3,666,156 Julius Baer Holding AG 6,200 17,097,182 SIG AG (Reg.) 7,600 6,317,725 Union Bank of Switzerland Ord. (Bearer) 6,100 9,816,559 66,117,298 UNITED KINGDOM - 8.6% Amec PLC Ord. 2,057,900 6,292,161 BTP PLC 850,000 6,007,361 Courtaulds Textiles PLC 1,400,000 7,508,575 Doncasters PLC sponsored ADR (a) 241,800 7,435,350 English China Clay PLC 1,700,000 7,001,487 Hazlewood Foods PLC Ord. 3,000,900 9,526,417 House of Fraser PLC Class L 1,733,400 4,604,902 Iceland Group PLC 4,587,550 17,054,355 Laporte PLC 750,000 10,087,455 Somerfield PLC 1,970,000 11,136,051 Shell Transport & Trading Co. PLC (Reg.) 675,000 5,018,666 Smith Holdings PLC (DS) 2,900,000 11,144,236 Thistle Hotels PLC 1,750,000 5,087,586 Unilever PLC Ord. 570,000 6,066,508 113,971,110 UNITED STATES OF AMERICA - 23.3% AccuStaff, Inc. (a) 330,000 11,838,750 Alliant Techsystems, Inc. (a) 176,000 11,253,000 Alumax, Inc. 212,300 10,482,313 America West Holdings Corp. Class B (a) 38,100 1,152,525 Amoco Corp. 140,000 6,195,000 Breed Technologies, Inc. 338,000 6,823,375 CNF Transportation, Inc. 290,000 11,201,250 Callaway Golf Co. 265,000 7,221,250 Chesapeake Corp. 135,000 4,910,625 Coastal Corp. (The) 110,000 7,858,125 Consolidated Freightways Corp. (a) 300,000 5,381,250 Dayton Hudson Corp. 57,900 5,055,394 Dillards, Inc. Class A 125,000 4,578,125 Federated Department Stores, Inc. (a) 140,000 6,886,250 FIRSTPLUS Financial Group, Inc. (a) 250,000 12,125,000 Fruit of the Loom, Inc. Class A (a) 125,000 4,671,875 Gibson Greetings, Inc. (a) 248,900 6,510,291 International Business Machines Corp. 46,400 5,376,600 King World Productions, Inc. 520,000 13,877,500 Lone Star Industries, Inc. 43,300 3,577,663 Maxim Group, Inc. (a) 255,000 4,590,000 Mirage Resorts, Inc. (a) 250,000 5,515,625 Occidental Petroleum Corp. 125,000 3,679,688 Owens-Corning 278,500 11,575,156 Penney (J.C.) Co., Inc. 127,500 9,060,469 Pep Boys-Manny, Moe & Jack 410,000 8,917,500 Personnel Group of America, Inc. (a) 140,000 2,782,500 Philip Morris Companies, Inc. 309,000 11,529,563 Phillips Petroleum Co. 75,000 3,717,188 Phycor, Inc. (a) 300,000 6,825,000 Providian Financial Corp. 150,000 9,028,125 SHARES VALUE (NOTE 1) Rubbermaid, Inc. 305,000 $ 8,730,625 Ryder Systems, Inc. 240,000 8,355,000 SLM Holding Corp. 246,700 10,531,006 Southdown, Inc. 90,000 6,367,500 Starwood Hotels & Resorts Trust 100,000 5,018,750 Texas Instruments, Inc. 100,000 6,406,250 USX-Marathon Group 170,000 6,088,125 Ultramar Diamond Shamrock Corp. 330,000 10,663,125 US Airways Group, Inc. (a) 70,000 4,978,750 U.S. Office Products Co. (a) 165,750 2,931,703 USFreightways Corp. 170,000 6,077,500 Valero Energy Corp. 150,000 4,856,250 Wellpoint Health Networks, Inc. (a) 33,000 2,380,125 307,581,684 VENEZUELA - 0.7% Compania Anonima Nacional Telefonos de Venezuela sponsored ADR 290,000 9,715,000 TOTAL COMMON STOCKS (Cost $944,590,082) 1,182,353,481 PREFERRED STOCKS - 6.2% CONVERTIBLE PREFERRED STOCKS - 0.7% NETHERLANDS - 0.4% Samas-Groep NV 79,306 4,902,938 UNITED STATES OF AMERICA- 0.3% Unisys Corp. $3.75, Series A 84,200 4,136,325 TOTAL CONVERTIBLE PREFERRED STOCKS 9,039,263 NONCONVERTIBLE PREFERRED STOCKS - 5.5% GERMANY - 2.8% Dyckerhoff AG 23,000 7,914,695 Jungheinrich AG 36,800 7,397,294 Moebel Walther AG 51,700 2,187,872 Porsche AG 7,500 19,126,900 36,626,761 ITALY - 2.7% Telecom Italia Spa 3,823,250 20,144,055 Telecom Italia Mobile Spa de Risp 4,400,000 15,840,003 35,984,058 TOTAL NONCONVERTIBLE PREFERRED STOCKS 72,610,819 TOTAL PREFERRED STOCKS (Cost $62,545,069) 81,650,082 CASH EQUIVALENTS - 4.1% Taxable Central Cash Fund (Cost $54,472,747) (b) 54,472,747 54,472,747 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,061,607,898) $ 1,318,476,310 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $29,805,810 or 2.2% of net assets. (d) Affiliated company (see Note 7 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $570,109,833 and $592,827,403, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $58,042 for the period (see Note 4 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Beru AG $ - $ 2,813,372 $ - $ - Haci Omer Sabanci Holdings AS - 1,818,488 - - Samas-Groep NV 528,511 - - 15,097,042 TOTALS $ 528,511 $ 4,631,860 $ - $ 15,097,042 MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 1.4% Basic Industries 12.9 Cash Equivalents 4.1 Construction & Real Estate 7.6 Durables 8.7 Energy 4.6 Finance 17.5 Health 1.0 Holding Companies 1.1 Industrial Machinery & Equipment 6.2 Media & Leisure 5.3 Nondurables 6.9 Retail & Wholesale 6.8 Services 2.0 Technology 3.1 Transportation 3.4 Utilities 7.4 100.0% INCOME TAX INFORMATION At April 30, 1998 the aggregate cost of investment securities for income tax purposes was $1,062,072,824. Net unrealized appreciation aggregated $256,403,486 of which $287,325,249 related to appreciated investment securities and $30,921,763 related to depreciated investment securities. WORLDWIDE FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE (COST $1,061,607,898) - $ 1,318,476,310 SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 1,424 (COST $1,424) RECEIVABLE FOR INVESTMENTS SOLD 1,078,619 RECEIVABLE FOR FUND SHARES SOLD 16,290,929 DIVIDENDS RECEIVABLE 4,083,535 INTEREST RECEIVABLE 306,930 OTHER RECEIVABLES 18,824 TOTAL ASSETS 1,340,256,571 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 2,998,337 PAYABLE FOR FUND SHARES REDEEMED 5,419,192 ACCRUED MANAGEMENT FEE 792,397 OTHER PAYABLES AND 574,308 ACCRUED EXPENSES TOTAL LIABILITIES 9,784,234 NET ASSETS $ 1,330,472,337 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,012,844,445 UNDISTRIBUTED NET INVESTMENT INCOME 4,638,324 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN 56,126,088 CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 256,863,480 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 69,597,672 $ 1,330,472,337 SHARES OUTSTANDING NET ASSET VALUE, OFFERING PRICE $19.12 AND REDEMPTION PRICE PER SHARE ($1,330,472,337 (DIVIDED BY) 69,597,672 SHARES)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 9,835,347 DIVIDENDS INTEREST 2,711,878 12,547,225 LESS FOREIGN TAXES WITHHELD (1,123,511) TOTAL INCOME 11,423,714 EXPENSES MANAGEMENT FEE $ 4,298,879 TRANSFER AGENT FEES 1,633,407 ACCOUNTING FEES AND EXPENSES 316,310 NON-INTERESTED TRUSTEES' COMPENSATION 2,058 CUSTODIAN FEES AND EXPENSES 322,995 REGISTRATION FEES 48,638 AUDIT 32,514 LEGAL 3,558 REPORTS TO SHAREHOLDERS 76,566 MISCELLANEOUS 24,449 TOTAL EXPENSES BEFORE REDUCTIONS 6,759,374 EXPENSE REDUCTIONS (95,165) 6,664,209 NET INVESTMENT INCOME 4,759,505 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (INCLUDING 57,165,108 REALIZED GAIN OF $1,062,506 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN CURRENCY TRANSACTIONS (565,909) 56,599,199 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 152,051,033 ASSETS AND LIABILITIES IN 5,256 152,056,289 FOREIGN CURRENCIES NET GAIN (LOSS) 208,655,488 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 213,414,993 OTHER INFORMATION $ 66,646 EXPENSE REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS TRANSFER AGENT CREDITS 28,519 $ 95,165
SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS OPERATIONS $ 4,759,505 $ 13,203,402 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 56,599,199 131,822,297 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 152,056,289 21,778,124 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 213,414,993 166,803,823 DISTRIBUTIONS TO SHAREHOLDERS (7,179,195) (9,779,572) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (75,708,402) (21,857,664) TOTAL DISTRIBUTIONS (82,887,597) (31,637,236) SHARE TRANSACTIONS 676,057,747 1,506,418,739 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 81,440,892 31,099,635 COST OF SHARES REDEEMED (718,745,079) (1,388,711,635) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 38,753,560 148,806,739 TOTAL INCREASE (DECREASE) IN NET ASSETS 169,280,956 283,973,326 NET ASSETS BEGINNING OF PERIOD 1,161,191,381 877,218,055 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $4,638,324 AND $12,155,595, RESPECTIVELY) $ 1,330,472,337 $ 1,161,191,381 OTHER INFORMATION SHARES SOLD 39,422,408 90,093,952 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 5,220,569 2,080,227 REDEEMED (42,300,009) (82,695,485) NET INCREASE (DECREASE) 2,342,968 9,478,694
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 17.27 $ 15.18 $ 13.32 $ 13.96 $ 12.76 $ 9.63 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .07 D .21 D, I .22 .17 .08 .11 NET REALIZED AND UNREALIZED GAIN (LOSS) 3.05 2.43 1.79 (.08) 1.37 3.28 TOTAL FROM INVESTMENT OPERATIONS 3.12 2.64 2.01 .09 1.45 3.39 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.11) (.17) (.15) (.16) (.10) (.24) FROM NET REALIZED GAIN (1.16) (.38) - (.57) (.15) (.02) H TOTAL DISTRIBUTIONS (1.27) (.55) (.15) (.73) (.25) (.26) NET ASSET VALUE, END OF PERIOD $ 19.12 $ 17.27 $ 15.18 $ 13.32 $ 13.96 $ 12.76 TOTAL RETURN B, C 19.73% 17.95% 15.25% .95% 11.55% 36.10% E RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $1,330,472 $1,161,191 $877,218 $659,045 $748,738 $287,278 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.19% A 1.18% 1.19% 1.17% 1.32% 1.40% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.17% A, F 1.16% F 1.18% F 1.16% F 1.32% 1.40% EXPENSE REDUCTIONS RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .84% A 1.24% 1.71% 2.05% 1.40% 1.99% PORTFOLIO TURNOVER RATE 108% A 85% 49% 70% 69% 57% AVERAGE COMMISSION RATE G $ .0017 $ .0054 $ .0003 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). C THE TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR HAVE NOT BEEN ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. H INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. I INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.06 PER SHARE.
NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED APRIL 30, 1998 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity International Growth & Income Fund, Fidelity Diversified International Fund, Fidelity International Value Fund, Fidelity Overseas Fund and Fidelity Worldwide Fund (the funds) are funds of Fidelity Investment Trust (the trust). The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Each fund is authorized to issue an unlimited number of shares. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION. Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. If trading or events occurring in other markets after the close of the principal market in which securities are traded is expected to materially affect the value of those securities, then they are valued at their fair value taking this trading or these events into account. Fair value is determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations or at their fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Equity securities that have reached the limit for aggregate foreign ownership may trade at a premium to local share price. If the broker-quoted premium is not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which securities are normally traded. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchase and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade date and settlement on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. Each fund may be subject to foreign taxes on income and gains on investments which are accrued based upon each fund's understanding of the tax rules and regulations that exist in the markets in which they invest. Each fund accrues such taxes as applicable. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Certain foreign currency gains (losses) are taxable as ordinary income and, therefore, increase (decrease) taxable ordinary income available for distribution. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), market discount, and losses deferred due to wash sales. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the funds, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the funds, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the funds' investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the funds may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc., (formerly FMR Texas, Inc.) an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the funds are recorded as interest income in the accompanying financial statements. FUTURES CONTRACTS. Certain funds may use futures contracts to manage their exposure to the stock market and to fluctuations in currency values. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in each applicable fund's Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in each applicable fund's schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. RESTRICTED SECURITIES. Certain funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. At the end of the period, the funds had no investments in restricted securities (excluding 144A issues). 3. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities), and the market value of future contracts opened and closed, is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .45%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The basic fee for Diversified International, International Value and Overseas is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on each fund's investment performance as compared to the appropriate index over a specified period of time. For the period, each fund's management fee was equivalent to the following annualized rates expressed as a percentage of average net assets after the performance adjustment, if applicable: International Value .87% Overseas .92% Diversified International .85% International Growth & Income, Worldwide .75% SUB-ADVISER FEE. FMR, on behalf of the funds, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Far East) Inc., Fidelity International Investment Advisors (FIIA), and Fidelity Investments Japan Limited (FIJ). In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SUB-ADVISER FEE - CONTINUED advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, each fund's transfer agent fees were equivalent to the following annualized rates expressed as a percentage of average net assets: Overseas, International Growth & Income and Diversified International .28% Worldwide .29% International Value .24% ACCOUNTING FEES. FSC maintains each fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. 5. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of certain fund's expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of each applicable fund's expenses. For the period, the reductions under these arrangements are shown under the caption "Other Information" on each applicable fund's Statement of Operations. 6. BENEFICIAL INTEREST. At the end of the period, an affiliate of FMR was record owner of approximately 6% of the total outstanding shares of the International Value Fund. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company which the fund has ownership of at least 5% of the voting securities. Information regarding transactions with affiliated companies is included in "Other Information" at the end of each applicable fund's schedule of investments. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. For quotes.* For account balances and holdings. To review orders and mutual fund activity. To change your PIN. To speak to a Fidelity representative. 0 * BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP61 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. 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Westshore Blvd. Tampa, FL GEORGIA 3445 Peachtree Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS One North Franklin Street Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, IL INDIANA 4729 East 82nd Street Indianapolis, IN MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 155 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29115 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 16850 SW 72 Avenue Tigard, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 6150 Poplar Road Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 4017 Northwest Parkway Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan Fidelity Investments Japan Ltd. Fidelity International Investment Advisors Fidelity International Investment Advisors (U.K.) Limited OFFICERS Edward C. Johnson 3d, PRESIDENT Robert C. Pozen, SENIOR VICE PRESIDENT Robert Lawrence, VICE PRESIDENT, DIVERSIFIED INTERNATIONAL FUND Richard Spillane Jr., VICE PRESIDENT, INTERNATIONAL GROWTH & INCOME FUND, INTERNATIONAL VALUE FUND, OVERSEAS FUND, WORLDWIDE FUND Penelope A. Dobkin, VICE PRESIDENT, WORLDWIDE FUND Gregory Fraser, VICE PRESIDENT, DIVERSIFIED INTERNATIONAL FUND Richard Mace Jr., VICE PRESIDENT, INTERNATIONAL VALUE FUND, OVERSEAS FUND Eric D. Roiter, SECRETARY Richard A. Silver, TREASURER John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA * INDEPENDENT TRUSTEES TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA CUSTODIAN Chase Manhattan Bank, N.A. New York, NY FIDELITY'S INTERNATIONAL EQUITY FUNDS Canada Fund Diversified International Fund Emerging Markets Fund Europe Fund Europe Capital Appreciation Fund France Fund Germany Fund Global Balanced Fund Hong Kong and China Fund International Growth & Income Fund International Value Fund Japan Fund Japan Small Companies Fund Latin America Fund Nordic Fund Pacific Basin Fund Southeast Asia Fund Overseas Fund United Kingdom Fund Worldwide Fund CORPORATE HEADQUARTERS 82 Devonshire Street Boston, MA 02109 1-800-544-8888 THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE BULK RATE U.S. POSTAGE P A I D F I D E L I T Y INVESTMENTS (registered trademark) P.O. Box 193 Boston, MA 02101 (2_FIDELITY_LOGOS)FIDELITY'S TARGETED INTERNATIONAL EQUITY FUNDS FIDELITY CANADA FUND FIDELITY EMERGING MARKETS FUND FIDELITY EUROPE FUND FIDELITY EUROPE CAPITAL APPRECIATION FUND FIDELITY FRANCE FUND FIDELITY GERMANY FUND FIDELITY HONG KONG AND CHINA FUND FIDELITY JAPAN FUND FIDELITY JAPAN SMALL COMPANIES FUND FIDELITY LATIN AMERICA FUND FIDELITY NORDIC FUND FIDELITY PACIFIC BASIN FUND FIDELITY SOUTHEAST ASIA FUND FIDELITY UNITED KINGDOM FUND SEMIANNUAL REPORT APRIL 30, 1998 CONTENTS
MARKET RECAP 4 A REVIEW OF WHAT HAPPENED IN WORLD MARKETS DURING THE PAST SIX MONTHS. CANADA FUND 5 PERFORMANCE 6 FUND TALK: THE MANAGER'S OVERVIEW 8 INVESTMENT CHANGES 9 INVESTMENTS 11 FINANCIAL STATEMENTS EMERGING MARKETS FUND 13 PERFORMANCE 14 FUND TALK: THE MANAGER'S OVERVIEW 16 INVESTMENT CHANGES 17 INVESTMENTS 20 FINANCIAL STATEMENTS EUROPE FUND 22 PERFORMANCE 23 FUND TALK: THE MANAGER'S OVERVIEW 25 INVESTMENT CHANGES 26 INVESTMENTS 28 FINANCIAL STATEMENTS EUROPE CAPITAL APPRECIATION FUND 30 PERFORMANCE 31 FUND TALK: THE MANAGER'S OVERVIEW 33 INVESTMENT CHANGES 34 INVESTMENTS 36 FINANCIAL STATEMENTS FRANCE FUND 38 PERFORMANCE 39 FUND TALK: THE MANAGER'S OVERVIEW 41 INVESTMENT CHANGES 42 INVESTMENTS 44 FINANCIAL STATEMENTS GERMANY FUND 46 PERFORMANCE 47 FUND TALK: THE MANAGER'S OVERVIEW 49 INVESTMENT CHANGES 50 INVESTMENTS 52 FINANCIAL STATEMENTS HONG KONG AND CHINA FUND 54 PERFORMANCE 55 FUND TALK: THE MANAGER'S OVERVIEW 57 INVESTMENT CHANGES 58 INVESTMENTS 60 FINANCIAL STATEMENTS JAPAN FUND 62 PERFORMANCE 63 FUND TALK: THE MANAGER'S OVERVIEW 65 INVESTMENT CHANGES 66 INVESTMENTS 68 FINANCIAL STATEMENTS JAPAN SMALL COMPANIES FUND 70 PERFORMANCE 71 FUND TALK: THE MANAGER'S OVERVIEW 73 INVESTMENT CHANGES 74 INVESTMENTS 76 FINANCIAL STATEMENTS LATIN AMERICA FUND 78 PERFORMANCE 79 FUND TALK: THE MANAGER'S OVERVIEW 81 INVESTMENT CHANGES 82 INVESTMENTS 84 FINANCIAL STATEMENTS NORDIC FUND 86 PERFORMANCE 87 FUND TALK: THE MANAGERS' OVERVIEW 89 INVESTMENT CHANGES 90 INVESTMENTS 92 FINANCIAL STATEMENTS PACIFIC BASIN FUND 94 PERFORMANCE 95 FUND TALK: THE MANAGER'S OVERVIEW 97 INVESTMENT CHANGES 98 INVESTMENTS 101 FINANCIAL STATEMENTS SOUTHEAST ASIA FUND 103 PERFORMANCE 104 FUND TALK: THE MANAGER'S OVERVIEW 106 INVESTMENT CHANGES 107 INVESTMENTS 110 FINANCIAL STATEMENTS UNITED KINGDOM FUND 112 PERFORMANCE 113 FUND TALK: THE MANAGER'S OVERVIEW 115 INVESTMENT CHANGES 116 INVESTMENTS 119 FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS 121 NOTES TO THE FINANCIAL STATEMENTS
To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. MARKET RECAP During the six-month period that ended April 30, 1998, some of the world's financial markets enjoyed robust growth, while others continued to unravel. Most European markets benefited from strong economies and low interest rates, while many Asian markets continued to writhe under the increasing pressures of currency devaluations, economic instability, and civil and political unrest. For the period, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index returned 15.56%. EUROPE: Most economies in Europe continued to thrive amidst an environment of relatively benign inflation and reduced interest rates, as many countries began to prepare for the advent of the European Monetary Union in January 1999. Many corporations followed the path to efficiency through restructuring and robust merger and acquisition activity. In addition, the stronger U.S. dollar made European exports more attractive. The MSCI Europe Index returned an impressive 29.24% during the period. Strong individual performers included Portugal, Spain and Italy. However, the strong U.S. dollar took back some of the gains for dollar-based investors in all European markets, except the United Kingdom. EMERGING MARKETS: Latin American markets struggled as the economic turmoil in Southeast Asia prompted a massive sell-off of most emerging-market stocks at the beginning of the period. The Brazilian market rebounded and performed fairly well during the period after interest rates quickly fell from a high point of more than 40% in late fall 1997. However, Mexico and Venezuela - two major exporters of oil - - were victims of the plummeting price of oil at the end of 1997, which widened their trade gaps and eventually put pressure on their currencies. The MSCI Emerging Markets Free - Latin America Index returned 7.97% during the period. Southeast Asian markets - the origin of most of the volatility in emerging markets - performed poorly. The depreciation of many currencies in the region prompted central banks to dramatically raise interest rates, which had a slowing effect on the economies by making borrowing more expensive. The MSCI Far East ex-Japan Free Index fell 11.87% during the period. The Southeast Asian crisis also caused volatility in U.S. markets by introducing the threat of cheapening Asian imports. JAPAN AND THE FAR EAST: Japan suffered from sharply falling stock prices and depreciating currencies relative to the U.S. dollar. In addition, the failure of several Japanese financial firms raised concerns about widespread corporate bankruptcies throughout the country. The Tokyo Stock Exchange Index - a gauge of the Japanese market - was down 12.44% over the past six months. Although the Hong Kong market did suffer from the influence of currency problems in Southeast Asia at the beginning of the period, the market recovered in early 1998 and fared significantly better than other Asian markets because of its more mature and less volatile nature. The Hang Seng Index, which measures the performance of the Hong Kong stock market, dropped 0.64% during the period. U.S. AND CANADA: Despite economic difficulties in Southeast Asia and the resulting concern that U.S. corporate earnings would slow, the U.S. stock market continued to perform well during the period. In fact, the Standard & Poor's 500 Index - a measure of the U.S. stock market - returned 22.49% during this time. Some U.S. corporations with business exposure to Asia did report disappointing earnings and their stocks were harshly punished - sometimes sending the market tumbling for a day or two. However, investors seemed to adopt a new attitude - one that overlooked short-term troubles and focused on longer-term growth - helping many of these stocks to rebound quickly. Overall, the continued strength of the U.S. economy, combined with low interest rates and low inflation, buoyed the stock market. Through the first four months of 1998, cash inflows into stock mutual funds were very strong and the Dow Jones Industrial Average closed above 9000 for the first time in April. Canada's stock market also generated healthy returns - to the point that share prices were often outpacing corporate profits, causing equity valuations to hit historic highs. In addition, Canada has improved its economy and the unemployment rate dropped from double digits a year ago to about 8.5% during the period. The Toronto Stock Exchange 300 was up 11.13% for the six-month period. BONDS: Although bond markets couldn't keep pace with global equity markets, some bonds generated relatively strong gains. U.S.-based bonds topped most foreign bonds on the continued strength of the U.S. dollar and a backdrop of benign inflation. Convertible bonds - issues that are convertible into a fixed number of a company's common shares - - outperformed most other types of bonds, particularly government bonds, since they were more tied to the strength of regional equity markets. And, despite the turbulence created in many markets by the Southeast Asian crisis, the J.P. Morgan Emerging Markets Bond Index still managed to return 14.56% for the period. The Salomon Brothers Non-U.S. World Government Bond Index - a proxy for developed countries - - fell 1.02% for the period. S&P 500 EAFE * YEAR TO DATE THROUGH APRIL 30, 1998. Row: 1, Col: 1, Value: nil Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: 6.1 Row: 2, Col: 2, Value: 7.38 Row: 3, Col: 1, Value: 31.57 Row: 3, Col: 2, Value: 56.16 Row: 4, Col: 1, Value: 18.56 Row: 4, Col: 2, Value: 69.44 Row: 5, Col: 1, Value: 5.1 Row: 5, Col: 2, Value: 24.63 Row: 6, Col: 1, Value: 16.61 Row: 6, Col: 2, Value: 28.27 Row: 7, Col: 1, Value: 31.69 Row: 7, Col: 2, Value: 10.53 Row: 8, Col: 1, Value: -3.1 Row: 8, Col: 2, Value: -23.45 Row: 9, Col: 1, Value: 30.47 Row: 9, Col: 2, Value: 12.13 Row: 10, Col: 1, Value: 7.62 Row: 10, Col: 2, Value: -12.17 Row: 11, Col: 1, Value: 10.08 Row: 11, Col: 2, Value: 32.56 Row: 12, Col: 1, Value: 1.32 Row: 12, Col: 2, Value: 7.78 Row: 13, Col: 1, Value: 37.58 Row: 13, Col: 2, Value: 11.21 Row: 14, Col: 1, Value: 22.96 Row: 14, Col: 2, Value: 6.05 Row: 15, Col: 1, Value: 32.11 Row: 15, Col: 2, Value: 4.82 Row: 16, Col: 1, Value: 15.1 Row: 16, Col: 2, Value: 15.7 % CANADA PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 APRIL 30, 1998 MONTHS YEAR YEARS YEARS FIDELITY CANADA 9.40% 18.71% 56.78% 155.53% FIDELITY CANADA 6.12% 15.15% 52.08% 147.86% (INCL. 3.00% SALES CHARGE) TORONTO STOCK EXCHANGE 300 11.13% 27.30% 100.35% 162.56% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Toronto Stock Exchange 300 Index - a market capitalization weighted index of 300 stocks traded in the Canadian market. This benchmark includes reinvested dividends and capital gains if any, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 APRIL 30, 1998 YEAR YEARS YEARS FIDELITY CANADA 18.71% 9.41% 9.84% FIDELITY CANADA 15.15% 8.75% 9.50% (INCL. 3.00% SALES CHARGE) TORONTO STOCK EXCHANGE 300 27.30% 14.91% 10.13% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Canada Toronto Stck Exchange 300 00309 DR001 1988/04/30 9700.00 10000.00 1988/05/31 9237.72 9725.49 1988/06/30 9950.73 10504.99 1988/07/31 9809.69 10401.09 1988/08/31 9339.58 9882.47 1988/09/30 9535.46 10101.71 1988/10/31 9982.07 10415.89 1988/11/30 9864.54 10431.90 1988/12/31 10081.43 10739.39 1989/01/31 10842.14 11570.15 1989/02/28 10537.86 11289.75 1989/03/31 10714.02 11420.28 1989/04/30 10930.22 11673.63 1989/05/31 11298.57 11723.18 1989/06/30 11843.08 12089.08 1989/07/31 12563.75 12939.46 1989/08/31 12627.81 13174.79 1989/09/30 12547.74 12962.96 1989/10/31 12371.57 12980.56 1989/11/30 12443.64 13187.24 1989/12/31 12802.18 13402.30 1990/01/31 11763.94 12233.76 1990/02/28 11830.92 12149.14 1990/03/31 12031.87 12273.78 1990/04/30 11454.14 11342.00 1990/05/31 12207.71 12114.77 1990/06/30 12492.38 12135.75 1990/07/31 12592.86 12343.74 1990/08/31 11864.42 11596.95 1990/09/30 11671.84 11004.08 1990/10/31 11362.04 10644.42 1990/11/30 11730.45 10941.55 1990/12/31 12099.03 11416.56 1991/01/31 12152.68 11461.26 1991/02/28 13270.48 12302.91 1991/03/31 13851.73 12384.99 1991/04/30 13959.04 12371.87 1991/05/31 14576.06 12791.62 1991/06/30 14593.95 12598.59 1991/07/31 14549.24 12783.07 1991/08/31 14424.04 12841.19 1991/09/30 13941.16 12526.77 1991/10/31 14558.18 13117.50 1991/11/30 14012.69 12773.13 1991/12/31 14238.63 12834.76 1992/01/31 14495.26 12947.26 1992/02/29 14580.81 12844.22 1992/03/31 14172.09 12216.12 1992/04/30 14001.00 11999.08 1992/05/31 14124.57 12032.76 1992/06/30 14048.52 12135.66 1992/07/31 14409.72 12496.60 1992/08/31 14191.10 12273.19 1992/09/30 13582.78 11451.77 1992/10/31 13525.74 11670.23 1992/11/30 13487.72 11084.88 1992/12/31 13829.95 11501.22 1993/01/31 13753.80 11389.99 1993/02/28 14610.44 12081.49 1993/03/31 15409.97 12575.57 1993/04/30 15809.73 13105.20 1993/05/31 16028.65 13482.29 1993/06/30 16847.22 13695.56 1993/07/31 16238.05 13682.66 1993/08/31 16647.33 13932.44 1993/09/30 15828.77 13333.93 1993/10/31 16961.44 14375.31 1993/11/30 16571.19 13987.19 1993/12/31 17352.56 14659.84 1994/01/31 18115.73 15377.63 1994/02/28 17343.02 14737.65 1994/03/31 16703.87 14111.08 1994/04/30 16579.85 13928.69 1994/05/31 16656.17 14156.49 1994/06/30 15740.36 13203.89 1994/07/31 16045.63 13690.06 1994/08/31 16646.63 14441.69 1994/09/30 16732.48 14784.43 1994/10/31 16389.06 14478.81 1994/11/30 15196.61 13611.29 1994/12/31 15272.98 13797.32 1995/01/31 14203.87 13118.05 1995/02/28 14786.16 13661.22 1995/03/31 15712.08 14236.85 1995/04/30 16189.36 14586.95 1995/05/31 16695.28 15039.42 1995/06/30 16924.37 15325.88 1995/07/31 17506.66 15732.58 1995/08/31 17287.11 15657.06 1995/09/30 17535.29 15774.45 1995/10/31 16752.55 15508.54 1995/11/30 17439.84 16050.65 1995/12/31 18234.70 16236.89 1996/01/31 18541.48 17015.57 1996/02/29 18704.47 16963.22 1996/03/31 18992.08 17278.28 1996/04/30 19356.39 17866.72 1996/05/31 19816.57 18158.57 1996/06/30 19174.23 17576.11 1996/07/31 18618.18 17049.14 1996/08/31 19413.91 17902.69 1996/09/30 19941.20 18547.40 1996/10/31 20938.26 19989.96 1996/11/30 21542.25 21339.37 1996/12/31 21144.49 20740.64 1997/01/31 22812.52 21775.86 1997/02/28 22248.51 21639.92 1997/03/31 20736.48 20363.89 1997/04/30 20880.48 20624.94 1997/05/31 22764.52 22367.45 1997/06/30 22368.51 22591.64 1997/07/31 23412.54 24173.41 1997/08/31 22524.52 23109.31 1997/09/30 24036.55 24772.01 1997/10/31 22656.52 23625.12 1997/11/30 21636.50 22271.20 1997/12/31 22438.16 22867.88 1998/01/31 21963.06 22480.47 1998/02/28 23116.87 24356.50 1998/03/31 24148.51 26076.97 1998/04/30 24786.50 26255.75 IMATRL PRASUN SHR__CHT 19980430 19980506 113654 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Canada Fund on April 30, 1988, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $24,786 - a 147.86% increase on the initial investment. For comparison, look at how the Toronto Stock Exchange 300 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $26,256 - a 162.56% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) CANADA FUND TALK: THE MANAGER'S OVERVIEW An interview with Tom Sweeney, Portfolio Manager of Fidelity Canada Fund Q. TOM, HOW DID THE FUND PERFORM? A. For the six- and 12-month periods that ended April 30, 1998, the fund returned 9.40% and 18.71%, respectively, compared to the Toronto Stock Exchange (TSE) 300 returns of 11.13% and 27.30%. Q. HOW WOULD YOU CHARACTERIZE THE CANADIAN STOCK MARKET'S PERFORMANCE DURING THE PAST SIX MONTHS? A. The Canadian market has been strengthening over the past six months. I would characterize the stock market as "frothy," with share prices going up much faster than the profits of its listed companies. Price-to-earnings ratios increased, valuations hit historic highs and stocks became very expensive. Within this environment, certain industries performed very strongly - financial services and telecommunications in particular. Although the market improved, Canada's heavy dependence on natural resources, which have underperformed the market, has limited the frothy performance of the Canadian stock market. Q. WHAT WAS BEHIND THIS MARKET ENVIRONMENT? A. One of the underlying factors included an improving Canadian economy, with the unemployment rate - which had been in double digits a year ago - dropping fairly dramatically to about 8.5%. However, one of the reasons that the Canadian economy lagged the U.S. is that there are more unions and labor regulations in Canada, so employers don't react quickly by increasing or reducing the number of employees when economic conditions shift. Provincial governments in Ontario and Alberta did a good job implementing economic reforms, but other provinces still have a number of workforce regulations that have proved cumbersome to employers. Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK DURING THE PERIOD? A. First, the fund's average market capitalization - or the average size of the companies in the fund - was much smaller than that of the TSE 300. During the period, large-cap stocks performed better than small-cap stocks. Second, the fund's weighting in natural resource stocks was heavier than the TSE 300's. These stocks generally underperformed, due primarily to events in Asia, that resulted in a drop in Asian consumption of these products. Finally, the fund's underweighting in banks, which performed very strongly, hurt fund performance. Q. WHAT HAS YOUR STRATEGY BEEN WITHIN THIS ENVIRONMENT? A. I've cut back on natural resource stocks. Within this group, performance varied. Some paper and forest product companies did very well, even though the underlying paper pricing showed no improvement during the period. However, after these stocks sold off last year due to fears about Asia's economic troubles, they became very cheap and prices rebounded. As they improved, I pared back the fund's weighting because I saw continued weak fundamentals. I also reduced holdings in precious metals producers after we saw a correction in the price of silver; the resulting performance of silver producers, including Pan American Silver and Silver Standard, was weak. Energy was another area that generally performed poorly. The warm winter weakened prices and inventories grew, factors that typically foreshadow weaker commodity prices. In fact, the price of oil came down very sharply in the past few months. The fund had been moderately overweighted relative to the TSE 300 in oil and gas stocks, so I sold some holdings during the period. I sold shares of Newport Petroleum and, to some extent, Renaissance Energy and Beau Canada because they did not make their production targets. However, in the long term I'm optimistic about energy, and will explain why later in our discussion. Q. WHICH STOCKS PERFORMED WELL? A. Some of the best opportunities in the past six months were in telecommunications companies. The fund benefited from the strong performance of BCE/Bell Canada, BC Telecom, Maritime Telegraph and Telephone, and Newtel Enterprises. However, these stocks became so expensive that I pared them back at the end of the period to be slightly underweighted relative to the TSE 300. Paper and forest product producers Donohue and MacMillan Bloedel did well. Avenor, a paper and forest product company, and Norcen, an energy company, were bought out by other companies during the period, and I took the opportunity to sell them at a profit. Some other energy holdings in the fund did very well. Examples include Genlyte, FirstEnergy - two of the fund's largest investments - and Niagara Mohawk. Banks, including National Bank of Canada, also performed very well. Q. WHAT'S BEHIND THE STRONG PERFORMANCE OF BANK STOCKS? A. In Canada, the valuations of bank stocks are currently at an historic high, but the performance of these stocks has been somewhat tempered because mergers and acquisitions are not allowed in Canada. However, a major event has recently occurred in the banking industry, with two of the big banks - Royal Bank of Canada and the Bank of Montreal - announcing that they want to merge. A governmental task force has formed to investigate the possibility of changing the law to allow mergers, with the decision expected in the fall. Interest rates are also a factor in the performance of bank stocks. The fundamentals for banks haven't been as good as for banks in the U.S., because interest rates have moved up slightly in Canada, and banks' earnings momentum has slowed. Still, the Canadian banks have generally had terrific performance. In spite of this slight rise in interest rates, investors are optimistic since the rate climb has propped up the Canadian dollar, which had been weakening. Q. WHICH STOCKS PERFORMED POORLY? A. In addition to the other natural resource stocks I mentioned before, base metal producers generally performed poorly. These included two zinc producers, Breakwater Resources and Cominco, as well as two nickel producers, Falconbridge and Inco. Their poor performance can be attributed primarily to the shakeup in Asian markets and the weak prices of underlying metals. Q. WHERE ARE YOU FINDING NEW OPPORTUNITIES? A. From a variety of industries. Seagram, one of the fund's top 10 holdings, had reported lower profits resulting from declining demand for its premium spirits in Asia, one of its prime markets, and its stock price declined. However, Seagram's asset value was significantly higher than the share price, so I added it to the fund, and it performed well. Noranda and Edperbrascan have been selling off some of their holdings; again, the companies' asset values were higher than their share prices and presented good investment opportunities. Westburne - a distributor of plumbing fixtures and supplies - showed promise based on excellent management and its earnings potential. The banking sector could benefit from the potential future allowance of bank mergers, so I added the Bank of Nova Scotia to the fund's holdings. Canadian Airlines, the second-largest airline in Canada after Air Canada, had been losing money for a long time, but recently posted a profit and showed promise for a turnaround. Q. TOM, WHAT IS YOUR OUTLOOK? A. Since Canada has a much higher proportion of its stock market in natural resources, it has lagged the U.S. market. However, I believe natural resources will make a recovery. It had begun a year ago, but was stalled by the Asia Pacific troubles and by two very warm winters and a cool summer. But, with low commodities prices limiting production, supply has tightened up. At some point, the tighter supply/demand balance could create a good scenario for price increases. Further, if the government continues to support the Canadian dollar and attract non-Canadian investors by increasing interest rates, foreign investment in Canada should have a positive impact on the Canadian stock market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. TOM SWEENEY ON THE ENERGY SECTOR: "I'm optimistic on energy in the long term, although it has disappointed in the short term. In the next few years, the industry is poised for a recovery in energy prices, simply because there is very low spare capacity for the production of crude oil in the world. If you compare 1998 to 1985 - when the price of energy collapsed - there was a lot more spare capacity in 1985, because Saudi Arabia could have produced 10 million barrels a day; but, it had cut back to producing 2 million barrels a day to try to support the price. Now, Saudi Arabia is back up to 8 million barrels, with very little spare production capacity in the rest of the world. "If you look at capacity utilization historically, the last two times that it has been this high were in 1973 and 1979, when the price went up dramatically, in fact tripling in 1973. The world is now in a very tight supply/demand scenario for energy. Short-term, though, with one of the warmest winters just over, there has been lower demand and growing inventories. "The U.S. has experienced declining energy production because we are a high-cost producer, with sources of energy discovered long ago drying up. Since Canadian oil fields are younger, Canadian production has been growing. Canada is now a net exporter of energy - because it uses less than it produces - so it has the potential to benefit from a future recovery in energy prices. Many Canadian energy companies are trading at low valuations relative to current energy prices. If energy prices recover, I believe the shares of these companies have significant upside potential. "The low valuations of Canadian energy companies have caught the eye of corporate buyers recently. Norcen Energy, a holding of the fund, was bought out by Union Pacific Resources, a large U.S. energy company. This was announced in January, and helped boost the fund's performance during the period." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Canadian issuers FUND NUMBER: 309 TRADING SYMBOL: FICDX START DATE: November 17, 1987 SIZE: as of April 30, 1998, more than $78 million MANAGER: Tom Sweeney, since 1996; manager, Fidelity Capital Appreciation Fund, 1986-1996; Fidelity Select Paper and Forest Products Portfolio, 1986; joined Fidelity in 1985 (checkmark) CANADA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 ROW: 1, COL: 1, VALUE: 25.3 ROW: 1, COL: 2, VALUE: 74.7 UNITED STATES 25.3% CANADA 74.7% AS OF OCTOBER 31, 1997 ROW: 1, COL: 1, VALUE: 26.4 ROW: 1, COL: 2, VALUE: 73.59999999999999 UNITED STATES 26.4% CANADA 73.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 95.7 94.3 SHORT-TERM INVESTMENTS 4.3 5.7 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO GENLYTE GROUP, INC. 6.7 7.4 (ELECTRICAL EQUIPMENT) PAN AMERICAN SILVER CORP. 6.5 6.2 (PRECIOUS METALS) NATIONAL BANK OF CANADA 4.9 2.9 (BANKS) FIRSTENERGY CORP. 4.0 0.0 (ELECTRIC UTILITY) SEAGRAM CO. LTD. 3.9 0.0 (BEVERAGES) HANCOCK FABRICS, INC. 3.9 4.2 (RETAIL & WHOLESALE, MISCELLANEOUS) ALCAN ALUMINIUM LTD. 3.4 2.0 (METALS AND MINING) DENBURY RESOURCES, INC. 3.3 0.8 (OIL & GAS) BCE, INC. 2.8 4.6 (TELEPHONE SERVICES) FPI LTD. 2.7 5.2 (FOODS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO BASIC INDUSTRIES 14.1 19.2 UTILITIES 14.1 11.3 ENERGY 13.9 23.5 FINANCE 10.2 5.3 NONDURABLES 9.2 8.9 PRECIOUS METALS 7.5 8.9 INDUSTRIAL MACHINERY & EQUIPMENT 6.7 7.4 TRANSPORTATION 5.9 1.8 RETAIL & WHOLESALE 5.6 4.2 CONSTRUCTION & REAL ESTATE 3.1 0.0 CANADA INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 95.7% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.8% Magellan Aerospace Corp. (a) 100,000 $ 646,481 BASIC INDUSTRIES - 14.1% CHEMICALS & PLASTICS - 1.2% Potash Corp. of Saskatchewan 10,000 890,318 IRON & STEEL - 0.3% Linamar Corp. 4,000 262,763 METALS & MINING - 8.2% Alcan Aluminium Ltd. 80,000 2,594,081 Breakwater Resources Ltd. (a) 200,000 363,395 Cominco Ltd. 80,000 1,311,017 Falconbridge Ltd. 10,000 153,744 Inco Ltd. 10,000 175,059 Noranda, Inc. 80,000 1,649,254 6,246,550 PAPER & FOREST PRODUCTS - 4.4% Alliance Forest Products, Inc. (a) 5,000 105,350 Cascades, Inc. 100,000 782,697 Domtar, Inc. 5,000 41,930 Donohue, Inc. (vtg.) 25,000 567,805 Groupe Forex, Inc. 2,200 8,730 MacMillan Bloedel Ltd. 50,000 711,066 Noranda Forest, Inc. 10,000 67,088 Paperboard Industries International, Inc. (a) 275,000 960,900 St. Laurent Paperboard, Inc. (a) 5,000 67,962 Tembec, Inc. Class A (a) 10,000 66,389 3,379,917 TOTAL BASIC INDUSTRIES 10,779,548 CONSTRUCTION & REAL ESTATE - 3.1% BUILDING MATERIALS - 3.1% Emco Ltd. 5,000 51,364 Hussmann International, Inc. 40,000 695,000 Richelieu Hardware Ltd. (a) 5,000 64,118 St. Lawrence Cement, Inc. Class A 10,000 136,972 Westburne, Inc. (a) 105,000 1,394,179 2,341,633 DURABLES - 0.3% AUTOS, TIRES, & ACCESSORIES - 0.3% Canadian Tire Corp. Ltd. Series A (a) 10,000 250,882 ENERGY - 13.9% ENERGY SERVICES - 0.8% Bonus Resource Services Corp. (a) 40,000 138,370 Peak Energy Services Ltd. (a) 86,200 225,899 Precision Drilling Class A (a) 10,000 237,604 601,873 OIL & GAS - 13.1% Amber Energy, Inc. (a) 10,000 109,717 Anderson Exploration Ltd. (a) 10,000 121,598 Beau Canada Exploration Ltd. (a) 400,000 679,269 Canadian Natural Resources Ltd. (a) 25,000 537,231 Canadian Occidental Petroleum Ltd. 80,000 1,624,096 Denbury Resources, Inc. (a) 150,000 2,531,535 Encal Energy Ltd. (a) 90,000 364,793 Gulf Canada Resources Ltd. (a) 50,000 260,317 Northrock Resources Ltd. (a) 20,000 314,476 SHARES VALUE (NOTE 1) Penn West Petroleum Ltd. (a) 40,000 $ 521,332 Petro-Canada 50,000 842,098 Pinnacle Resources Ltd. (a) 50,000 489,186 Renaissance Energy Ltd. (a) 15,200 292,645 Rio Alto Exploration Ltd. (a) 25,000 288,270 Ulster Petroleums Ltd. (a) 30,000 236,906 Vermilion Resources Ltd. (a) 125,000 764,352 9,977,821 TOTAL ENERGY 10,579,694 FINANCE - 10.2% BANKS - 8.1% Bank of Montreal 20,000 1,090,185 Bank of Nova Scotia 50,000 1,371,467 National Bank of Canada 180,000 3,710,821 6,172,473 INSURANCE - 2.1% Acceptance Insurance Co., Inc. (a) 5,000 114,063 Edperbrascan Corp. Ltd., Class A (vtg.) 75,000 1,530,452 1,644,515 TOTAL FINANCE 7,816,988 INDUSTRIAL MACHINERY & EQUIPMENT - 6.7% ELECTRICAL EQUIPMENT - 6.7% Genlyte Group, Inc. (a) 200,000 5,087,500 POLLUTION CONTROL - 0.0% Laidlaw Environmental Services, Inc. (a) 10,000 39,375 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 5,126,875 MEDIA & LEISURE - 2.3% ENTERTAINMENT - 1.3% Cinar Films, Inc. Class B (sub. vtg.) (a) 50,000 960,900 PUBLISHING - 1.0% Thomson Corp. 25,000 752,123 TOTAL MEDIA & LEISURE 1,713,023 NONDURABLES - 9.2% BEVERAGES - 3.9% Seagram Co. Ltd. 70,000 2,984,032 FOODS - 5.3% FPI Ltd. (a) 400,000 2,026,626 National Sea Products Ltd. (a) 300,000 1,897,341 Saputo Group, Inc. 5,000 131,556 4,055,523 TOTAL NONDURABLES 7,039,555 PRECIOUS METALS - 7.5% Greenstone Resources Ltd. (a) 10,000 60,799 Greenstone Resources Ltd. warrants 2/28/02 (a) 11,040 24,688 Pan American Silver Corp. (a) 500,000 4,944,268 Silver Standard Resources, Inc. (a) 210,800 707,111 5,736,866 RETAIL & WHOLESALE - 5.6% GENERAL MERCHANDISE STORES - 1.3% Hudson's Bay Co. Ord. 10,000 217,338 Sears Canada, Inc. 40,000 747,755 965,093 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 0.4% Alementation Couch-Tard, Inc. Class B (sub. vtg.) (a) 15,000 $ 205,982 Metro, Inc. Class A 10,000 132,779 338,761 RETAIL & WHOLESALE, MISCELLANEOUS - 3.9% Hancock Fabrics, Inc. 200,000 2,975,000 TOTAL RETAIL & WHOLESALE 4,278,854 SERVICES - 2.0% PRINTING - 0.2% Moore Corporation Ltd. 10,000 156,190 SERVICES - 1.8% CGI Group, Inc. Class A (sub. vtg.) (a) 50,000 1,376,708 TOTAL SERVICES 1,532,898 TRANSPORTATION - 5.9% AIR TRANSPORTATION - 3.9% Canadian Airlines Corp. (a) 300,000 1,111,150 Transat AT, Inc. (a) 240,000 1,844,928 2,956,078 RAILROADS - 0.7% Bombardier, Inc. Class B 20,000 539,502 TRUCKING & FREIGHT - 1.3% Laidlaw, Inc. 75,000 1,043,013 TOTAL TRANSPORTATION 4,538,593 UTILITIES - 14.1% CELLULAR - 0.3% Teleglobe, Inc. 5,000 218,386 ELECTRIC UTILITY - 9.8% Boralex, Inc. Class A (a) 100,000 314,476 Eastern Utilities Associates 10,000 262,500 FirstEnergy Corp. 100,000 3,025,000 Niagara Mohawk Power Corp. (a) 150,000 1,837,500 Unisource Energy Corp. (a) 113,000 1,998,688 7,438,164 TELEPHONE SERVICES - 4.0% BCE, Inc. 50,000 2,127,957 BC Telecom, Inc. 5,000 182,571 Island Telephone Co. Ltd. 10,000 356,407 Maritime Telegraph & Telephone Co. Ltd. 5,000 134,526 Newtel Enterprises Ltd. 10,000 279,185 3,080,646 TOTAL UTILITIES 10,737,196 TOTAL COMMON STOCKS (Cost $58,710,380) 73,119,086 CASH EQUIVALENTS - 4.3% Taxable Central Cash Fund (b) (Cost $3,258,583) 3,258,583 3,258,583 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $61,968,963) $ 76,377,669 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $72,525,867 and $97,675,016, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $3,232 for the period. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME FPI Ltd. $ - $ 1,747,895 $ - $ - National Sea Products Ltd. - 1,581,240 - - South Crofty Holdings Ltd. - 998,384 - - Totals $ - $ 4,327,519 $ - $ - INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $62,056,924. Net unrealized appreciation aggregated $14,320,745, of which $15,184,643 related to appreciated investment securities and $863,898 related to depreciated investment securities. CANADA FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 76,377,669 (COST $61,968,963) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 3,705,889 RECEIVABLE FOR FUND SHARES SOLD 25,130 DIVIDENDS RECEIVABLE 44,948 INTEREST RECEIVABLE 7,920 TOTAL ASSETS 80,161,556 LIABILITIES PAYABLE TO CUSTODIAN BANK $ 52,048 PAYABLE FOR INVESTMENTS PURCHASED 1,128,661 PAYABLE FOR FUND SHARES REDEEMED 198,622 ACCRUED MANAGEMENT FEE 20,971 OTHER PAYABLES AND 57,691 ACCRUED EXPENSES TOTAL LIABILITIES 1,457,993 NET ASSETS $ 78,703,563 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 65,124,656 UNDISTRIBUTED NET INVESTMENT INCOME 168,552 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (1,001,798) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 14,412,153 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 4,310,473 $ 78,703,563 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($78,703,563 (DIVIDED BY) 4,310,473 SHARES) $18.26 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $18.26) $18.82
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 541,848 DIVIDENDS INTEREST 54,635 596,483 LESS FOREIGN TAXES WITHHELD (58,950) TOTAL INCOME 537,533 EXPENSES MANAGEMENT FEE $ 311,791 BASIC FEE PERFORMANCE ADJUSTMENT (184,604) TRANSFER AGENT FEES 145,319 ACCOUNTING FEES AND EXPENSES 32,213 NON-INTERESTED TRUSTEES' COMPENSATION 158 CUSTODIAN FEES AND EXPENSES 28,553 REGISTRATION FEES 9,281 AUDIT 17,148 LEGAL 279 REPORTS TO SHAREHOLDERS 10,126 MISCELLANEOUS 153 TOTAL EXPENSES BEFORE REDUCTIONS 370,417 EXPENSE REDUCTIONS (23,200) 347,217 NET INVESTMENT INCOME 190,316 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (INCLUDING (76,656) REALIZED LOSS OF $189,266 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN CURRENCY TRANSACTIONS (23,197) (99,853) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 6,628,037 ASSETS AND LIABILITIES IN 6,341 6,634,378 FOREIGN CURRENCIES NET GAIN (LOSS) 6,534,525 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,724,841 OTHER INFORMATION $ 7,426 SALES CHARGES PAID TO FDC DEFERRED SALES CHARGES WITHHELD $ 2,681 BY FDC EXPENSE REDUCTIONS $ 22,680 DIRECTED BROKERAGE ARRANGEMENTS TRANSFER AGENT CREDITS 520 $ 23,200
SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS OPERATIONS $ 190,316 $ 228,412 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) (99,853) 13,785,439 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 6,634,378 (5,363,765) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,724,841 8,650,086 DISTRIBUTIONS TO SHAREHOLDERS (246,908) (783,295) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (10,106,122) (26,588,671) TOTAL DISTRIBUTIONS (10,353,030) (27,371,966) SHARE TRANSACTIONS 4,249,384 53,914,016 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 10,182,688 27,052,083 COST OF SHARES REDEEMED (28,570,522) (95,712,095) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (14,138,450) (14,745,996) REDEMPTION FEES 12,699 254,182 TOTAL INCREASE (DECREASE) IN NET ASSETS (17,753,940) (33,213,694) NET ASSETS BEGINNING OF PERIOD 96,457,503 129,671,197 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $168,552 AND $322,747, RESPECTIVELY) $ 78,703,563 $ 96,457,503 OTHER INFORMATION SHARES SOLD 250,121 2,741,798 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 627,013 1,540,551 REDEEMED (1,676,961) (5,109,443) NET INCREASE (DECREASE) (799,827) (827,094)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 18.88 $ 21.84 $ 17.55 $ 17.18 $ 17.82 $ 14.23 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) .04 D .03 D .08 D .05 - (.15) NET REALIZED AND UNREALIZED GAIN (LOSS) 1.47 1.39 4.27 .33 (.60) 3.76 TOTAL FROM INVESTMENT OPERATIONS 1.51 1.42 4.35 .38 (.60) 3.61 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.05) (.13) (.08) (.01) - (.02) FROM NET REALIZED GAIN (2.08) (4.29) - - - - IN EXCESS OF NET REALIZED GAIN - - - - (.04) - TOTAL DISTRIBUTIONS (2.13) (4.42) (.08) (.01) (.04) (.02) REDEMPTION FEES ADDED TO PAID IN CAPITAL - .04 .02 - - - NET ASSET VALUE, END OF PERIOD $ 18.26 $ 18.88 $ 21.84 $ 17.55 $ 17.18 $ 17.82 TOTAL RETURN B, C 9.40% 8.21% 24.99% 2.22% (3.37)% 25.40% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $78,704 $96,458 $129,671 $326,763 $368,330 $95,977 RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A .93% 1.01% 1.09% E 1.57% 2.00%E RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .84% A, F .92% F .98% F 1.08% F 1.57% 2.00% RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS .46% A .18% .40% .26% (.14)% (.66)% PORTFOLIO TURNOVER RATE 181% A 139% 139% 75% 59% 131% AVERAGE COMMISSION RATE G $ .0205 $ .0242 $ .0276
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
EMERGING MARKETS PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. Prior to February 19, 1993, Emerging Markets operated under certain different investment policies. Accordingly, the fund's historical performance may not represent its current investment policies. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY EMERGING MARKETS 2.04% -35.52% -10.64% 14.98% FIDELITY EMERGING MARKETS -1.02% -37.46% -13.33% 11.53% (INCL. 3.00% SALES CHARGE) MSCI EMERGING 3.64% -14.53% 38.81% 167.07% MARKETS FREE EMERGING MARKETS 3.49% -6.18% 27.66% N/A FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on November 1, 1990. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index - a market capitalization weighted index of over 850 stocks traded in 22 world markets. Mexico, Malaysia, Brazil, and Thailand are most heavily weighted, and together account for over 60% of the index. However, to measure how the fund's performance stacked up against its peers, you can compare it to the emerging markets funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 150 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY EMERGING MARKETS -35.52% -2.23% 1.88% FIDELITY EMERGING MARKETS -37.46% -2.82% 1.47% (INCL. 3.00% SALES CHARGE) MSCI EMERGING -14.53% 6.78% 14.00% MARKETS FREE EMERGING MARKETS -6.18% 4.79% N/A FUNDS AVERAGE AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Emerging Markets MS EMF Index (Gross) 00322 MS006 1990/11/01 9700.00 10000.00 1990/11/30 9564.20 9571.06 1990/12/31 9777.33 9975.54 1991/01/31 9709.16 10782.17 1991/02/28 10118.17 12378.30 1991/03/31 10108.44 12889.03 1991/04/30 10332.42 13027.70 1991/05/31 10332.42 14052.74 1991/06/30 9972.10 13551.10 1991/07/31 10186.34 14255.08 1991/08/31 10108.44 14557.58 1991/09/30 10225.30 14002.85 1991/10/31 10127.91 14578.49 1991/11/30 9991.58 14362.80 1991/12/31 10438.08 15976.83 1992/01/31 10517.68 17826.43 1992/02/29 10826.15 18620.48 1992/03/31 10806.24 19252.13 1992/04/30 11064.96 19122.79 1992/05/31 11542.58 19054.82 1992/06/30 11522.68 17165.89 1992/07/31 11144.56 17354.93 1992/08/31 10865.95 16548.35 1992/09/30 10796.29 16609.34 1992/10/31 10995.30 17499.53 1992/11/30 10905.75 17309.63 1992/12/31 11048.91 17823.04 1993/01/31 11201.38 17909.23 1993/02/28 11770.60 18207.62 1993/03/31 12095.86 18807.85 1993/04/30 12482.12 19240.41 1993/05/31 12756.56 19769.94 1993/06/30 12919.19 20356.62 1993/07/31 13142.82 20904.76 1993/08/31 14057.63 22673.81 1993/09/30 14372.73 23280.87 1993/10/31 16446.31 25369.70 1993/11/30 17096.84 26492.37 1993/12/31 20082.32 30871.45 1994/01/31 19501.26 31433.12 1994/02/28 18950.78 30873.94 1994/03/31 17115.84 28080.18 1994/04/30 16952.74 27518.51 1994/05/31 17391.08 28460.32 1994/06/30 16167.79 27675.84 1994/07/31 17401.28 29396.67 1994/08/31 19613.39 33045.18 1994/09/30 20112.90 33420.73 1994/10/31 19623.58 32817.87 1994/11/30 18267.77 31111.53 1994/12/31 16480.81 28612.77 1995/01/31 14212.53 25568.64 1995/02/28 14376.01 24912.84 1995/03/31 14089.92 25071.12 1995/04/30 14386.23 26195.85 1995/05/31 15837.11 27589.45 1995/06/30 16021.03 27671.05 1995/07/31 16828.21 28292.18 1995/08/31 16317.33 27625.75 1995/09/30 16245.81 27494.64 1995/10/31 15469.28 26442.14 1995/11/30 14968.62 25970.59 1995/12/31 15956.70 27122.44 1996/01/31 17548.21 29050.35 1996/02/29 17340.17 28588.47 1996/03/31 17464.99 28811.13 1996/04/30 18359.57 29963.08 1996/05/31 18349.17 29829.29 1996/06/30 18276.35 30015.55 1996/07/31 16840.87 27964.18 1996/08/31 17517.00 28679.97 1996/09/30 17901.88 28928.42 1996/10/31 17277.76 28156.91 1996/11/30 18182.73 28628.69 1996/12/31 17552.02 28758.18 1997/01/31 18565.85 30719.77 1997/02/28 19558.57 32035.35 1997/03/31 18470.81 31193.85 1997/04/30 17298.56 31248.96 1997/05/31 17023.98 32143.32 1997/06/30 17150.71 33863.53 1997/07/31 16855.01 34369.04 1997/08/31 13010.88 29995.61 1997/09/30 13422.75 30826.73 1997/10/31 10930.41 25768.45 1997/11/30 10275.64 24828.22 1997/12/31 10395.44 25426.53 1998/01/31 9691.58 23432.32 1998/02/28 10633.67 25878.08 1998/03/31 11055.99 27001.09 1998/04/30 11153.44 26706.95 IMATRL PRASUN SHR__CHT 19980430 19980506 115541 R00000000000093 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Emerging Markets Fund on November 1, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $11,153 - an 11.53% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International Emerging Markets Free Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $26,707 - a 167.07% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) EMERGING MARKETS FUND TALK: THE MANAGER'S OVERVIEW An interview with David Stewart, Portfolio Manager of Fidelity Emerging Markets Fund Q. DAVID, HOW DID THE FUND PERFORM? A. For the six months that ended April 30, 1998, the fund's return was 2.04%. During the same period, the Morgan Stanley Capital International Emerging Markets Free Index had a return of 3.64%, while the emerging markets funds average tracked by Lipper Analytical Services returned 3.49%. For the 12 months that ended April 30, 1998, the fund's return was -35.52%. Over that same period, the index and the average had returns of -14.53% and -6.18%, respectively. Q. YOU MADE SUBSTANTIAL CHANGES IN BOTH THE STRATEGY AND THE HOLDINGS OF THE FUND. CAN YOU ELABORATE ON THOSE CHANGES? A. I completely restructured the fund's portfolio during November and December 1997. The number of holdings was reduced from approximately 220 to about 150. In the first quarter of 1998, I took advantage of sharp rallies in Southeast Asian markets to reduce the fund's holdings in that region. Of particular note, I underweighted Malaysia, whereas in the previous period the fund owned a considerably higher percentage of Malaysian stocks than the Morgan Stanley index did. Indonesia was another country where I cut back sharply on the fund's holdings. With the cash raised by the sale of Asian securities, I increased the fund's holdings in European emerging markets, including those of Turkey, Poland and Greece. South Africa and Israel are two other countries where I increased the fund's investments. In addition, I built up significant positions in China and restructured the fund's holdings in India. Although the fund still underperformed the index and the average during the period, performance was hampered somewhat by the restructuring process, which is now complete. Q. YOU CUT BACK ON ASIAN HOLDINGS OVERALL BUT BUILT UP POSITIONS IN CHINA. CAN YOU EXPLAIN YOUR REASONING THERE? A. China has a massive domestic economy that is not overly dependent on exports. In general, I believe that companies operating in countries with large domestic economies are less vulnerable to disruptions in sales and revenues because they are less dependent on foreign trade. This may be an increasingly important consideration going forward, as many firms in Asia seek to capitalize on their countries' sharply depreciated currencies by increasing exports. A flood of inexpensive exports could lead to friction with those countries' trading partners. China might be somewhat insulated from these frictions by its sizable domestic economy. India was another country that fit this general description. In addition, the Indian economy was beginning to show signs of growth after a period of stagnation, so there was lots of room for positive surprises. Q. WHAT ABOUT LATIN AMERICA? WHAT WAS YOUR STRATEGY WITH RESPECT TO THE FUND'S HOLDINGS THERE? A. I maintained a lighter exposure to Latin American equities relative to the index. I saw some deterioration in the region's trade accounts, indicating less competitive performance. In addition, the outlook for corporate earnings was dimmer in view of higher interest rates prompted by the "Asian contagion" - the spread of volatility from the markets in Asia. However, there were still many attractive opportunities in Latin America for selective investors. Q. WHAT WAS IT ABOUT THE EMERGING MARKETS IN EUROPE THAT ATTRACTED YOU? A. For one thing, the imminent convergence of the European Economic Community (EEC) countries into a massive single-currency organization raised investors' expectations, especially for relatively new entries like Greece. Also, economic growth remained strong in those countries, interest rates were low and there were minimal spillover effects from Southeast Asia. Q. THE FUND'S HOLDINGS OF UTILITIES WENT FROM 16.2% TO 23.4% DURING THE PERIOD. WAS THAT A CONSCIOUS DECISION ON YOUR PART? A. Yes, it was part of my restructuring plan. In Asia, I reduced the fund's holdings of property and financial companies because they are extremely vulnerable in a high-interest-rate environment of the sort we saw in many Asian countries during the period. The fund's remaining investments in Asia were concentrated mostly in defensive, consumer-oriented industries such as gaming and tobacco. Utilities also are widely regarded as defensive stocks that tend to benefit from any "flight to quality" triggered by general market volatility. That's why I increased the percentage of the fund's utility holdings. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. One stock that helped was Industrial Credit and Investment Trust. This Indian-based finance company recently acquired a bank and received a full banking license, enabling it to increase its lending margins and decrease its borrowing costs. Investors responded positively to the prospects for higher earnings based on these developments. Real Africa Holdings - a South African holding company with interests in financial services, telecommunications and health care - also did well. The company benefited from injections of assets with significant upside potential as part of the black empowerment movement in that country. YTL Corporation is a Malaysian electric utility and conglomerate. Its stock price recovered nicely from extremely depressed levels, and I took advantage of this opportunity to take profits and reduce the fund's holdings of it by about two-thirds. Finally, Haci Omer Sabanci Holding is a Turkish holding company involved in banking, chemicals and telecommunications. The stock of this well-managed company rose, in part, because it was an undervalued issue in a market that was itself undervalued. Q. WHAT STOCKS WERE DISAPPOINTING? A. Indochina Goldfields severely hurt the fund's performance. The story there, of course, was the sharp decline in the price of gold over the period. I have since reduced the fund's position in this stock somewhat. Centrais Electricas Brasileiras is a Brazilian electric utility that was hurt by several factors. For one thing, investors had less confidence in the company's ability to raise rates because it was an election year in Brazil. In addition, the privatization process for electric utilities ran into unexpected delays. Q. WHAT'S YOUR OUTLOOK, DAVID? A. In the short term, I'm cautious because Asian contagion appears to be taking hold of many emerging markets again. To prepare for this eventuality, I raised the fund's cash position to about 7% by the end of the period, which should enable me to take advantage of some of the bargains that I expect to see in the coming months. I continue to be interested in Latin America on a stock-selective basis, as further Asian weakness may spill over into those markets. I'm very cautious on Russia because the economy there is sensitive to commodity prices, which have been weak lately. Until the Asian problems sort themselves out a bit more, most of my interest will be in the emerging markets of Europe, as well as South Africa, Israel, China and India - for the reasons I mentioned earlier. The markets in Europe are especially well insulated from the events in Asia, economic growth is good and the EEC convergence is a catalyst that will likely maintain investors' interest in the region. Looking out beyond the next six months or so, I believe that the worst will be over in Asia, and the stage will be set for those markets to make meaningful recoveries. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. DAVID STEWART ON INVESTING IN EXPORT-DRIVEN COMPANIES IN THE PACIFIC BASIN: "I think it's important to look past the obvious effects of the widespread currency devaluations in the Pacific Basin. At first glance, one might be attracted to certain companies and countries simply on the basis of their export potential. A cheaper local currency means that they can sell their goods and services less expensively in countries with more expensive currencies. Their ability to compete has therefore been enhanced, and both their sales and earnings - as denominated in the currency of the country in which they are based - are likely to rise. "In practice, it's not quite that straightforward. For one thing, in order to enhance their exporting capacity in a meaningful way, many Asian companies require large infusions of capital - a commodity not readily available in much of Asia right now. Moreover, even if we assume a substantial increase in exporting capacity, a rapid, widespread growth of exports could trigger the enactment of trade barriers to protect competing firms in countries where those exports are being sold. If that should happen, a company that depends primarily on exports for its revenues might suddenly find itself cut off from its main source of business. "This is why I prefer to invest in companies located in countries with strong internal economies. Firms in those countries typically derive more of their revenue from domestic sales instead of relying so much on exports. This offers more protection against the possibility of trade restrictions. Indonesia and the Philippines are examples of countries that currently depend more heavily on exports, while China and India are examples of countries with strong domestic economies. "Another way I try to protect the fund's holdings from trade sanctions and other risks is by buying the stocks of large, well-diversified companies. With a number of profitable business lines, a company is in a much better position to weather negative developments to any one of them. The precaution of buying well-established companies is especially important when investing in emerging markets, which by definition are more risky than established markets such as those in the United States and Western Europe." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of emerging market issuers, which can be found in regions such as Southeast Asia, Latin America, and Eastern Europe FUND NUMBER: 322 TRADING SYMBOL: FEMKX START DATE: November 1, 1990 SIZE: as of April 30, 1998, more than $472 million MANAGER: David Stewart, since November 1997; manager, Fidelity Emerging Markets Pilot Fund, since 1995; analyst covering emerging markets, since 1995; joined Fidelity in 1994 EMERGING MARKETS INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 ARGENTINA 3.7% UNITED STATES 7.1% ROW: 1, COL: 1, VALUE: 7.1 ROW: 1, COL: 2, VALUE: 4.4 ROW: 1, COL: 3, VALUE: 10.8 ROW: 1, COL: 4, VALUE: 4.1 ROW: 1, COL: 5, VALUE: 29.5 ROW: 1, COL: 6, VALUE: 13.0 ROW: 1, COL: 7, VALUE: 4.4 ROW: 1, COL: 8, VALUE: 7.2 ROW: 1, COL: 9, VALUE: 15.8 ROW: 1, COL: 10, VALUE: 3.7 TAIWAN 4.4% BRAZIL 15.8% SOUTH AFRICA 10.8% INDIA 7.2% TURKEY 4.1% MALAYSIA 4.4% MEXICO 13.0% OTHER 29.5% AS OF OCTOBER 31, 1997 UNITED STATES 8.0% ARGENTINA 4.1% ROW: 1, COL: 1, VALUE: 8.0 ROW: 1, COL: 2, VALUE: 4.9 ROW: 1, COL: 3, VALUE: 10.4 ROW: 1, COL: 4, VALUE: 3.6 ROW: 1, COL: 5, VALUE: 23.7 ROW: 1, COL: 6, VALUE: 12.7 ROW: 1, COL: 7, VALUE: 11.1 ROW: 1, COL: 8, VALUE: 7.2 ROW: 1, COL: 9, VALUE: 14.1 ROW: 1, COL: 10, VALUE: 4.1 THAILAND 4.9% BRAZIL 14.1% SOUTH AFRICA 10.4% PHILIPPINES 3.6% INDIA 7.2% MALAYSIA 11.1% OTHER 23.9% MEXICO 12.7% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 92.9% 90.5% BONDS 0.0% 1.5% SHORT-TERM INVESTMENTS 7.1% 8.0% TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO TELEBRAS SPONSORED ADR 4.9 3.3 (BRAZIL, TELEPHONE SERVICES) GRUPO FINANCIERO BANCOMER CLASS B 2.6 1.7 (MEXICO, BANKS) PETROBRAS PN (PFD. REG.) 2.6 1.8 (BRAZIL, OIL & GAS) INDUSTRIAL CREDIT & INVESTMENT TRUST 2.6 2.3 (INDIA, CREDIT & OTHER FINANCE) TELEFONOS DE MEXICO SA SPONSORED 2.5 1.7 ADR REPRESENTING ORD. CLASS L SHARES (MEXICO, TELEPHONE SERVICES) CENTRAIS ELECTRICAS BRASILEIRAS SA 2.4 2.4 (BRAZIL, ELECTRIC UTILITIES) TELESP PN (PFD. REG.) 2.0 0.8 (BRAZIL, TELEPHONE SERVICES) YPF SOCIEDAD ANONIMA SPONSORED ADR 1.9 1.4 REPRESENTING CLASS D SHARES (ARGENTINA, OIL & GAS) CATHAY LIFE INSURANCE CO. LTD. 1.8 1.4 (TAIWAN, INSURANCE) YAPI VE KREDI BANKASI AS 1.7 0.3 (TURKEY, BANKS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 25.4 31.1 UTILITIES 23.4 16.2 HOLDING COMPANIES 7.0 4.8 ENERGY 6.6 6.3 NONDURABLES 6.3 8.5 BASIC INDUSTRIES 5.2 5.9 CONSTRUCTION & REAL ESTATE 5.0 8.3 TECHNOLOGY 4.5 1.6 PRECIOUS METALS 3.1 4.1 MEDIA & LEISURE 2.1 1.8 EMERGING MARKETS INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 92.8% SHARES VALUE (NOTE 1) ARGENTINA - 3.7% Bansud SA Class B (a) 110,587 $ 1,039,652 Telecom Argentina Class B sponsored ADR 195,700 7,045,200 YPF Sociedad Anonima sponsored ADR representing Class D shares 261,100 9,105,863 17,190,715 BANGLADESH - 0.1% Beximco Pharmaceuticals Ltd. (c) 21,585 25,347 BERMUDA - 0.5% Central European Media Class C (a) 92,100 2,573,044 BRAZIL - 15.8% Centrais Electricas Brasileiras SA 252,851,000 11,278,849 Compania Cervejaria Brahma PN (Pfd. Reg.) 5,540,648 3,609,621 Compania Energertica Minas Gerais 105,855,000 5,137,471 Eletropaulo Metropolitana - Electricidade de Sao Paulo SA (a) 4,741,000 558,448 Empresa Bandeirante Energia (a) 6,120,000 208,718 Itaubanco PN (Pfd. Reg.) 4,600,000 3,097,372 Klabin Industria de Papel e Celulose PN 1,413,887 890,209 Petrobras PN (Pfd. Reg.) 47,760,000 12,111,759 Souza Cruz Industria Comerico 464,600 3,798,706 Telebras sponsored ADR 187,500 22,839,844 Telesp PN (Pfd. Reg.) 27,622,635 9,396,359 Votorantim Celulose e Papel SA (Pfd. Reg.) 47,768,505 918,985 73,846,341 CANADA - 0.9% First Dynasty Mines Ltd. (a) 846,800 260,381 Indochina Goldfields Ltd. (a) 2,918,800 3,977,540 Indochina Goldfields Ltd. (a)(c) 39,000 53,147 4,291,068 CHILE - 1.8% Compania Cervecerias Unidas SA sponsored ADR 116,500 3,218,313 Enersis SA sponsored ADR (a) 50,000 1,471,875 Sociedad Quimica y Minera de Chile sponsored ADR 68,000 2,953,750 Vina Concha Stet y Toro SA sponsored ADR 28,400 923,000 8,566,938 CHINA (PEOPLES REPUBLIC) - 1.1% Guangshen Railway Co. Class H 7,686,000 1,438,304 Qingling Motors Co. Ltd. Class H 4,600,000 1,988,772 Zhenhai Refining & Chemical Co., Class H 6,948,000 1,905,465 5,332,541 COLOMBIA - 1.1% Suramericana de Inversiones SA 340,700 5,243,071 CZECH REPUBLIC - 0.9% CEZ AS (a) 106,000 3,183,561 Komercni Banka AS sponsored ADR (a) 70,300 808,450 3,992,011 ESTONIA - 0.3% Eesti Uhispank AS sponsored GDR (a)(c) 93,105 1,252,262 SHARES VALUE (NOTE 1) GREECE - 1.2% Alpha Credit Bank (a) 18,630 $ 1,965,621 Commercial Bank of Greece 59,040 3,715,246 5,680,867 HONG KONG - 1.7% China Telecom Ltd. 1,125,000 2,172,656 China Resources Beijing Land Ltd. 6,764,000 3,579,067 Glorious Sun Enterprises 6,402,000 1,561,564 Shanghai Industrial Holdings Ltd. Class H 257,000 880,603 8,193,890 HUNGARY - 1.0% Magyar Tavkozlesi RT sponsored ADR 76,600 2,259,700 Magyar Olaj-es Gazipari RT (a) 77,700 2,360,627 4,620,327 INDIA - 7.2% Bharat Petroleum Corp. Ltd. 144,600 1,456,377 Bajaj Auto Ltd. 28,150 422,268 Chemplast Sanmar Ltd. 210,000 137,480 Chemplast Sanmar Ltd. (c) 315,000 206,219 Colgate-Palmolive 1,299 8,579 Dr Reddy's Laboratories Ltd. 103,600 1,089,932 Hindalco Industries Ltd. 3,560 65,320 Hindustan Petroleum Corp. Ltd. 400 3,659 ITC Ltd. 90,000 1,782,239 Industrial Credit & Investment Trust (a) 4,655,860 12,109,976 Mahanagar Telephone Nigam Ltd. GDR (a)(c) 108,800 1,713,600 Mahanagar Telephone Nigam Ltd. 647,700 4,109,792 Mahindra & Mahindra Ltd. 70 459 Oriental Bank of Commerce 450,000 717,235 Ranbaxy Laboratories Ltd. 20,250 338,307 Reliance Industries Ltd. 1,102 5,194 State Bank of India 1,089,900 7,903,521 Tata Engineering & Locomotive Ltd. 7,125 45,183 Tata Power Co. 567,700 1,416,427 33,531,767 INDONESIA - 0.9% Gulf Indonesia Resources Ltd. 181,600 2,792,100 PT Astra Argo Niaga Lestari Tbk (a) 3,591,000 1,559,841 4,351,941 ISRAEL - 4.0% Bank Hapoalim BM 2,423,300 6,492,208 ECI Telecom Ltd. 174,300 5,316,150 Elron Electronics Industries Ltd. 96,100 1,681,750 Koor Industries Ltd. sponsored ADR 208,000 5,278,000 18,768,108 KOREA (SOUTH) - 2.3% Lg Electronics, Inc. 45,000 535,354 Samsung Electronics Co. Ltd.: (vtg.) 100,529 5,566,140 rights 6/1/98 (a) 7,998 154,395 Samsung Fire & Marine Insurance 15,469 4,571,833 10,827,722 LUXEMBOURG - 1.3% Minorco SA (For. Reg.) 307,500 6,024,043 MEXICO - 13.0% Cifra SA de CV, Series C (a) 2,448,300 4,157,382 Corporacion Geo SA de CV (a) 666,440 4,598,844 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEXICO - CONTINUED Gruma SA Class B sponsored ADR (a)(c) 112,850 $ 1,015,650 Grupo Carso SA de CV Class A-1 1,130,000 7,105,747 Grupo Financiero: Bancomer Class B 17,606,900 12,149,839 Inbursa SA Class B 1,147,208 3,498,903 Bannamex-Accival Class B (a) 762,000 2,377,885 Grupo Televisa SA de CV sponsored ADR (a) 75,300 3,087,300 Grupo Elektra SA 3,520,000 5,023,834 Kimberly Clark de Mexico SA Class A 1,238,000 6,071,915 Telefonos de Mexico SA sponsored ADR representing Ord. Class L shares 207,900 11,772,338 60,859,637 MALAYSIA - 4.4% Arab Malaysian Corp. BHD 2,795,428 1,078,477 Amway Holding BHD 660,000 1,299,665 Carlsberg Brewery BHD 724,000 2,502,237 Hume Industries BHD 1,281,000 1,050,197 Hong Leong Credit BHD 1,927,300 1,559,396 Malaysian Plantations BHD 6,068,000 1,641,977 RJ Reynolds BHD 42,000 66,952 Rothmans of Pall Mall BHD 280,000 2,306,765 Sungei Bagen Rubber Co. BHD 10,000 219,692 YTL Corp. BHD 2,792,200 4,338,851 YTL Power International BHD (a) 3,625,680 3,283,268 YTL Cement BHD 2,620,800 1,123,451 20,470,928 PAKISTAN - 0.6% Dandot Cement Co. Ltd. (a) 93,750 3,638 Hub Power Co. Ltd. GDR 91,300 2,305,325 Pakistan State Oil Co. Ltd. 98,813 484,025 2,792,988 PERU - 0.2% Compania de Minas Buenaventura SA Class B sponsored ADR 50,000 775,000 PHILIPPINES - 1.5% First Philippines Holdings Corp. 852,500 624,814 Lepanto Consolidated Mining Co. 165,952,000 2,226,429 Manila Electric Co. Class B 860,000 2,435,776 QueenBee Resources Corp. warrants 3/25/03 (a) 3,785,000 1,716,180 7,003,199 POLAND - 1.0% Bank Handlowy W Warszawie SA GDR Unit (Reg.S) (a) 160,500 3,025,425 Polifarb Cieszyn-Wroclaw SA (a) 505,300 1,874,512 4,899,937 RUSSIA - 3.2% Tatneft AO sponsored ADR (Reg.) (a) 155,500 3,012,813 Mosenergo AO sponsored ADR (a) 75,700 2,706,275 Unified Energy Systems sponsored ADR (a) 147,500 4,793,750 Vimpel Communications sponsored ADR (a) 80,200 4,330,800 14,843,638 SHARES VALUE (NOTE 1) SOUTH AFRICA - 10.8% Barlow Rand Ltd. Ord. 273,700 $ 2,645,740 Coronation Holdings Ltd., Class N (1/100th vtg.) 126,430 2,601,904 Elandsrand Gold Mines Ltd. Ord. 483,200 2,151,380 JCI Ltd. 160,100 963,103 Johnnies Industrial Corp. Ltd. (Reg.) 501,700 7,247,274 Liberty Life Association of Africa Ltd. 134,395 4,547,649 Orion Selections: Ltd. 1,579,000 3,593,252 Holdings Ltd. 1,058,500 3,141,882 Persetel Q Data Holdings Ltd. 307,300 3,344,514 Plessey Corp. Ltd. 1,882,000 2,960,700 Real Africa Holdings Ltd. (a) 1,689,884 6,487,335 Real Africa Holdings Ltd. rights 5/20/98 (a) 580,067 487,837 Rembrandt Group Ltd. 767,700 6,988,068 Sasol, Ltd. 357,400 3,606,886 50,767,524 SRI LANKA - 0.5% Aitken Spence & Co. Ltd. 95,000 292,631 Development Finance Corp. of Ceylon 200,288 964,977 John Keells Holdings Ltd. 141,223 747,330 National Development Bank 150,000 556,828 2,561,766 TAIWAN - 4.4% Asustek Computer, Inc. (a) 178,100 3,629,568 Bank Sinopac (a) 3,035,000 2,208,980 Cathay Life Insurance Co. Ltd. 2,078,000 8,318,428 Cathay Construction Co. Ltd. 3,407,400 3,162,032 China Trust Co. Ltd. (a) 2,887,000 3,388,282 20,707,290 THAILAND - 2.7% Bangkok Bank Public Co. Ltd. (For. Reg.) 1,403,000 3,457,458 BEC World PCL (For. Reg.) 290,200 1,535,689 Bangkok Expressway PCL (For. Reg.) (a) 2,497,200 1,975,735 Industrial Finance Corp. of Thailand (For. Reg.) 6,556,766 2,721,357 Nithipat Capital: PCL (a) 2,395,900 - PCL (warrants) (For. Reg.) (a) 49,800 - Siam Makro PCL (For. Reg.) 335,600 552,804 Thai Military Bank Ltd. (For. Reg.) 9,687,820 2,487,922 12,730,965 TURKEY - 4.1% Egs Gayrimenkul Yatirim Orta Class B (a) 64,717,400 1,941,522 Guney Biraciliu (a) 17,862,100 1,929,107 Haci Omer Sabanci Holding AS 85,584,100 6,247,639 Koytas Tekstil Sanayi ve Ticaret Anonim Sirketi 26,770,000 1,231,420 Yapi Ve Kredi Bankasi AS 165,044,800 8,087,195 19,436,883 UNITED KINGDOM - 0.0% Bakyrchik Gold PLC (a) 515,773 60,323 VENEZUELA - 0.6% Compania Anonima Nacional Telefonos de Venezuela sponsored ADR 85,000 2,847,500 TOTAL COMMON STOCKS (Cost $473,405,947) 435,069,581 CONVERTIBLE PREFERRED STOCKS - 0.1% SHARES VALUE (NOTE 1) PHILIPPINES - 0.1% PDCP Development Bank (Cost $859,496) 2,252,138 $ 386,081 CASH EQUIVALENTS - 7.1% Taxable Central Cash Fund (b) (Cost $33,408,594) 33,408,594 33,408,594 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $507,674,037) $ 468,864,256 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,266,225 or 0.9% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $201,524,641 and $225,619,870, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $701 for the period. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Charan Insurance PCL (For. Reg.) $ - $ 76,484 $ - $ - PT Perdanacipta Multi Finance - 1,405,411 - - Tong Hua Daily News Co. Ltd. (For. Reg.) - 316,290 - - Totals $ - $ 1,798,185 $ - $ - MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Basic Industries 5.2% Cash Equivalents 7.1 Construction & Real Estate 5.0 Durables 1.4 Energy 6.6 Finance 25.4 Health 0.3 Holding Companies 7.0 Media & Leisure 2.1 Nondurables 6.3 Precious Metals 3.1 Retail & Wholesale 2.1 Services 0.2 Transportation 0.3 Technology 4.5 Utilities 23.4 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $509,092,517. Net unrealized depreciation aggregated $40,228,261, of which $83,123,557 related to appreciated investment securities and $123,351,818 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $97,011,000, all of which will expire on September 30, 2004. EMERGING MARKETS FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 468,864,256 (COST $507,674,037) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 4,181,852 (COST $4,193,279) RECEIVABLE FOR INVESTMENTS SOLD 2,187,298 RECEIVABLE FOR FUND SHARES SOLD 500,351 DIVIDENDS RECEIVABLE 1,741,625 INTEREST RECEIVABLE 138,810 REDEMPTION FEES RECEIVABLE 61 TOTAL ASSETS 477,614,253 LIABILITIES PAYABLE TO CUSTODIAN BANK $ 81,175 PAYABLE FOR INVESTMENTS PURCHASED 3,430,362 PAYABLE FOR FUND SHARES REDEEMED 1,198,748 ACCRUED MANAGEMENT FEE 293,169 OTHER PAYABLES AND 478,271 ACCRUED EXPENSES TOTAL LIABILITIES 5,481,725 NET ASSETS $ 472,132,528 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 871,413,868 DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (19,074,549) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (341,137,692) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (39,069,099) AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 45,832,014 $ 472,132,528 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($472,132,528 (DIVIDED BY) 45,832,014 SHARES) $10.30 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $10.30) $10.62
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 4,689,638 DIVIDENDS INTEREST 1,137,281 5,826,919 LESS FOREIGN TAXES WITHHELD (443,600) TOTAL INCOME 5,383,319 EXPENSES MANAGEMENT FEE $ 1,688,385 TRANSFER AGENT FEES 1,110,473 ACCOUNTING FEES AND EXPENSES 173,328 NON-INTERESTED TRUSTEES' COMPENSATION 852 CUSTODIAN FEES AND EXPENSES 390,158 REGISTRATION FEES 23,990 AUDIT 45,825 LEGAL 1,439 REPORTS TO SHAREHOLDERS 87,175 MISCELLANEOUS 32,835 TOTAL EXPENSES BEFORE REDUCTIONS 3,554,460 EXPENSE REDUCTIONS (64,390) 3,490,070 NET INVESTMENT INCOME 1,893,249 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (INCLUDING (215,328,541) REALIZED LOSS OF $1,636,897 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN CURRENCY TRANSACTIONS (1,740,530) (217,069,071) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 221,450,087 ASSETS AND LIABILITIES IN 1,161,014 222,611,101 FOREIGN CURRENCIES NET GAIN (LOSS) 5,542,030 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,435,279 OTHER INFORMATION $ 252,296 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 1,470 EXPENSE REDUCTIONS $ 58,597 DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 3,599 TRANSFER AGENT CREDITS 2,194 $ 64,390
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 1,893,249 $ 9,380,546 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) (217,069,071) 26,296,015 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 222,611,101 (357,058,651) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,435,279 (321,382,090) DISTRIBUTIONS TO SHAREHOLDERS (1,893,249) (9,380,546) FROM NET INVESTMENT INCOME IN EXCESS OF NET INVESTMENT INCOME (8,926,799) (8,604,392) TOTAL DISTRIBUTIONS (10,820,048) (17,984,938) SHARE TRANSACTIONS 70,463,222 345,209,422 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 10,654,699 17,580,514 COST OF SHARES REDEEMED (104,880,164) (788,069,622) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (23,762,243) (425,279,686) REDEMPTION FEES 111,477 650,998 TOTAL INCREASE (DECREASE) IN NET ASSETS (27,035,535) (763,995,716) NET ASSETS BEGINNING OF PERIOD 499,168,063 1,263,163,779 END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF $19,074,549 AND $10,147,750, $ 472,132,528 $ 499,168,063 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 7,295,597 20,888,778 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,174,708 1,073,294 REDEEMED (10,856,150) (49,788,241) NET INCREASE (DECREASE) (2,385,845) (27,826,169)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 10.35 $ 16.61 $ 15.14 $ 19.25 $ 16.18 $ 11.05 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .04 D .15 D .12 D .05 .06 .06 D NET REALIZED AND UNREALIZED GAIN (LOSS) .14 (6.17) 1.60 (4.13) 2.97 5.28 TOTAL FROM INVESTMENT OPERATIONS .18 (6.02) 1.72 (4.08) 3.03 5.34 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.04) (.13) (.18) (.04) (.04) (.08) IN EXCESS OF NET INVESTMENT INCOME (.19) (.12) (.09) - (.01) - FROM NET REALIZED GAIN - - - - - (.15) TOTAL DISTRIBUTIONS (.23) (.25) (.27) (.04) (.05) (.23) REDEMPTION FEES ADDED TO PAID IN CAPITAL - .01 .02 .01 .09 .02 NET ASSET VALUE, END OF PERIOD $ 10.30 $ 10.35 $ 16.61 $ 15.14 $ 19.25 $ 16.18 TOTAL RETURN B, C 2.04% (36.74)% 11.69% (21.17)% 19.32% 49.58% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 472,133 $ 499,168 $ 1,263,164 $ 1,095,583 $ 1,976,371 $ 757,737 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.59% A 1.36% 1.30% 1.28% 1.52% 1.91% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.56% A, E 1.35% E 1.29% E 1.28% 1.52% 1.91% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .85% A .89% .74% .46% .39% .44% PORTFOLIO TURNOVER RATE 96% A 69% 77% 78% 107% 57% AVERAGE COMMISSION RATE F $ .0007 $ .0020 $ .0017 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
EUROPE PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 APRIL 30, 1998 MONTHS YEAR YEARS YEARS FIDELITY EUROPE 28.39% 45.07% 174.40% 298.14% FIDELITY EUROPE 24.54% 40.72% 166.17% 286.20% (INCL. 3.00% SALES CHARGE) MSCI EUROPE 29.24% 45.89% 172.61% 330.76% EUROPEAN REGION 26.03% 39.23% 154.57% 207.83% FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Europe Index - an unmanaged market capitalization weighted index that is designed to represent the performance of developed stock markets in Europe. As of April 30, 1998, the index included over 550 equity securities of companies domiciled in 14 European countries. To measure how the fund's performance stacked up against its peers, you can compare it to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 APRIL 30, 1998 YEAR YEARS YEARS FIDELITY EUROPE 45.07% 22.37% 14.82% FIDELITY EUROPE 40.72% 21.63% 14.47% (INCL. 3.00% SALES CHARGE) MSCI EUROPE 45.89% 22.21% 15.72% EUROPEAN REGION 39.23% 20.39% 11.64% FUNDS AVERAGE AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Europe MS Europe Index (Net) 00301 MS002 1988/04/30 9700.00 10000.00 1988/05/31 9593.74 9812.92 1988/06/30 9381.22 9713.94 1988/07/31 9282.55 9735.71 1988/08/31 8796.79 9293.77 1988/09/30 9206.65 9799.56 1988/10/31 9836.62 10707.15 1988/11/30 9958.06 10839.18 1988/12/31 9969.01 10897.40 1989/01/31 10442.25 11292.02 1989/02/28 10465.52 11163.80 1989/03/31 10643.95 11244.71 1989/04/30 11101.68 11556.81 1989/05/31 10799.11 10964.63 1989/06/30 11093.92 11417.01 1989/07/31 12086.94 12760.89 1989/08/31 11993.84 12601.49 1989/09/30 12536.90 12817.89 1989/10/31 11668.01 11977.49 1989/11/30 12350.71 12642.50 1989/12/31 13192.26 14003.29 1990/01/31 13357.06 13965.77 1990/02/28 13011.76 13631.12 1990/03/31 13404.15 13823.44 1990/04/30 13137.32 13456.59 1990/05/31 13945.65 14551.77 1990/06/30 14526.39 15062.85 1990/07/31 15405.36 15697.16 1990/08/31 13568.96 14140.81 1990/09/30 12226.97 12475.43 1990/10/31 12776.32 13526.75 1990/11/30 12760.63 13662.67 1990/12/31 12586.60 13465.36 1991/01/31 12835.60 13918.44 1991/02/28 13614.73 15135.93 1991/03/31 12883.79 14120.14 1991/04/30 12851.66 13972.52 1991/05/31 12907.89 14384.68 1991/06/30 11775.34 13177.43 1991/07/31 12369.73 14089.45 1991/08/31 12618.73 14346.68 1991/09/30 13076.57 14777.84 1991/10/31 12795.44 14466.53 1991/11/30 12409.89 14125.99 1991/12/31 13110.22 15230.93 1992/01/31 13168.34 15226.54 1992/02/29 13326.09 15285.00 1992/03/31 12869.44 14750.07 1992/04/30 13716.33 15564.16 1992/05/31 14388.86 16449.87 1992/06/30 14256.02 16143.53 1992/07/31 13741.24 15566.76 1992/08/31 13782.75 15516.00 1992/09/30 13566.88 15259.38 1992/10/31 12553.93 14194.68 1992/11/30 12545.63 14187.75 1992/12/31 12779.39 14513.23 1993/01/31 12711.68 14537.61 1993/02/28 12787.85 14703.93 1993/03/31 13625.71 15460.35 1993/04/30 14074.25 15801.33 1993/05/31 14243.52 15971.32 1993/06/30 13845.75 15738.00 1993/07/31 13854.21 15792.02 1993/08/31 14979.81 17177.78 1993/09/30 14962.89 17124.42 1993/10/31 15597.62 17837.83 1993/11/30 15292.95 17452.78 1993/12/31 16250.88 18763.10 1994/01/31 17423.80 19718.62 1994/02/28 17015.83 19020.30 1994/03/31 16539.86 18481.96 1994/04/30 17015.83 19247.28 1994/05/31 16361.38 18429.11 1994/06/30 16165.89 18235.62 1994/07/31 16905.34 19191.35 1994/08/31 17440.80 19800.04 1994/09/30 17202.82 19014.91 1994/10/31 18001.76 19843.26 1994/11/30 17330.31 19083.18 1994/12/31 17267.55 19191.65 1995/01/31 16896.30 19041.41 1995/02/28 17198.48 19472.83 1995/03/31 17612.90 20376.47 1995/04/30 18208.64 21028.11 1995/05/31 18571.25 21458.65 1995/06/30 19097.91 21660.95 1995/07/31 19952.66 22790.00 1995/08/31 19572.77 21908.99 1995/09/30 20436.15 22570.83 1995/10/31 20298.01 22464.22 1995/11/30 20168.50 22623.95 1995/12/31 20519.91 23340.91 1996/01/31 20582.85 23493.50 1996/02/29 21338.19 23921.48 1996/03/31 21859.73 24207.53 1996/04/30 22192.44 24382.68 1996/05/31 22830.87 24571.09 1996/06/30 23073.66 24841.64 1996/07/31 22633.05 24530.47 1996/08/31 23397.37 25258.40 1996/09/30 23793.02 25789.87 1996/10/31 24386.50 26388.60 1996/11/30 25321.68 27725.83 1996/12/31 25778.63 28262.89 1997/01/31 25672.07 28346.83 1997/02/28 26224.26 28729.51 1997/03/31 26718.33 29666.09 1997/04/30 26621.45 29526.07 1997/05/31 27861.46 30794.81 1997/06/30 29217.72 32343.17 1997/07/31 30138.04 33864.60 1997/08/31 28733.34 31935.68 1997/09/30 31397.42 35038.86 1997/10/31 30079.91 33328.62 1997/11/30 30670.86 33848.87 1997/12/31 31678.64 35093.83 1998/01/31 32895.42 36562.86 1998/02/28 35149.11 39429.76 1998/03/31 37688.48 42246.62 1998/04/30 38619.58 43075.50 IMATRL PRASUN SHR__CHT 19980430 19980506 113855 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Europe Fund on April 30, 1988, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $38,620 - a 286.20% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International Europe Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $43,076 - a 330.76% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) EUROPE FUND TALK: THE MANAGER'S OVERVIEW An interview with Sally Walden, Portfolio Manager of Fidelity Europe Fund Q. HOW DID THE FUND PERFORM, SALLY? A. For the six months that ended on April 30, 1998, the fund produced a return of 28.39%. The Morgan Stanley Capital International (MSCI) Europe Index returned 29.24% in that period, while the European region funds average tracked by Lipper Analytical Services returned 26.03%. For the 12 months that ended April 30, 1998, the fund returned 45.07%, while the MSCI Europe Index and European funds average returned 45.89% and 39.23%, respectively. Q. ALTHOUGH THE FUND BEAT ITS LIPPER PEER GROUP, CAN YOU EXPLAIN WHY IT SLIGHTLY UNDERPERFORMED THE MSCI EUROPE INDEX OVER THE PAST SIX MONTHS? A. The main reason for the underperformance compared with the benchmark index was the portfolio's bias toward medium-sized companies. For much of the review period, these stocks continued to trail the market leaders as they had done in the previous six months. Since March, however, medium-sized companies in many European markets have begun to rebound, and this has helped the portfolio. In the United Kingdom, the advance of medium-sized companies was particularly strong after investors became more certain that interest rates had probably peaked, allowing smaller companies to improve their profits because they tend to be more sensitive to interest rates. Q. WHICH HOLDINGS PERFORMED PARTICULARLY WELL? A. Many of the fund's holdings in the finance sector helped performance significantly, including Banco Bilbao Vizcaya, Spain's second-largest bank. This company is continuing to build a presence in Latin America, where lending profit margins are higher. In addition, Credito Italiano, Italy's sixth-largest bank, reported that fee income from its asset management business was supplementing moderate loan growth. France's Societe Generale reported strong gains in equity trading and commissions that more than offset provisions for Asian loans. And HSBC Holdings returned to favor after the Asian crisis appeared to subside. Other strong performers were in the telecommunications sector. Vodafone, the UK's largest mobile phone operator, rose on better-than-expected subscriber numbers. Telecom Italia Mobile, Europe's largest cellular telephone company, reported higher profits as it signed up large numbers of new clients. And Telefonica de Espana, Spain's largest telecommunications company, announced a joint venture with Portugal Telecom that will help its operations outside of its traditional markets. Telecel, Portugal's largest mobile phone company, became a new entrant to the portfolio's top 10 holdings during the review period. Its share price benefited from increased demand. Q. WERE THERE ANY DISAPPOINTMENTS? A. In such a strong market, most of the fund's disappointments were stocks that didn't keep pace with the overall market, as opposed to those that fell in price. During much of the period, falling oil prices hurt the relative performance of oil companies such as Shell, British Petroleum, Total and Nationale Elf Acquitaine. Roche, Switzerland's second-largest drug company, surprised investors by taking a larger-than-expected charge to integrate last year's acquisition of Corange, and its share price lagged as a result. In the U.K., the third-largest fashion retailer, Next, underperformed after it warned that its first-half profits will decline because it had insufficient inventories of its best-selling lines. Q. HAVE THERE BEEN ANY MAJOR CHANGES TO THE FUND'S COUNTRY WEIGHTINGS OVER THE SIX-MONTH PERIOD? A. There were some minor changes in country allocations, but only as a result of share-price appreciation and where I found attractive companies. Overall, the portfolio remained overweighted in Nordic markets relative to the index because of its many holdings in Sweden and Finland. The main underweighted positions remained in Germany and the Netherlands. In the case of Germany, this position reflected the difficulty of finding companies with shareholder-friendly management that were attractively valued. Q. IS THE FUND STILL BIASED TOWARDS MEDIUM-SIZED COMPANIES? A. Yes, medium-sized companies are presently more strongly represented in the fund than they are in the index. About 66% of the portfolio is invested in stocks with market capitalizations of more than $5 billion, while the index has 86% of its value in this tier of the market. More than 25% of the fund is invested in companies with market capitalizations of between $1 billion and $5 billion, a segment that represents only 12% of the index. Q. DID YOU FAVOR ANY PARTICULAR INDUSTRY SECTORS? A. The allocation to different sectors has not changed greatly over the past six months. The fund's exposure to durables declined three percentage points mainly because a position in German car manufacturer Volkswagen was sold. The weighting of the finance sector rose by about two percentage points largely as a result of the appreciation of stocks in this sector. Merger speculation within the financial industry has been a prominent feature of the markets in different countries. The merger of UBS and Swiss Bank Corp., for example, created the world's second-largest bank. The deal sparked off share price increases in related companies. Also, the forthcoming start of the single European currency will intensify competition among companies across borders, because it eliminates exchange rate risks and makes it easier for companies to sell products and services throughout the region. In Italy, France, Germany and Scandinavia, banks are expected to have to consolidate quickly if they want to be up to such increased competition. Q. WHAT IS THE OUTLOOK FOR EUROPEAN MARKETS AND THE FUND? A. I believe the backdrop for European stock markets is fairly positive, with long-term promise for a number of reasons. One of those is that profit growth is accelerating because economic growth has become stronger at the same time that inflation has remained subdued. Economic recovery in continental Europe is clearly under way, although the pace has differed across the continent. Over the short term, however, some backlash cannot be ruled out after the extraordinary advances seen in the first quarter of 1998. Nevertheless, the demand for equities is expected to remain strong, with large amounts of money flowing into equity mutual funds. Over the medium to longer term, I believe fundamentals in Europe will stay positive. There remains considerable scope for companies to improve their profitability: Many companies will continue to restructure to prepare themselves for the more competitive environment of a single currency. I feel this will provide a number of attractive investment opportunities. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. SALLY WALDEN DISCUSSES EUROPE'S MOVE TOWARD A UNIFIED CURRENCY, THE EURO: "Starting next year, 11 countries - Germany, France, the Netherlands, Austria, Luxembourg, Belgium, Ireland, Finland, Italy, Spain and Portugal - will begin a process that will result in their giving up their national currencies to create a single currency, the Euro. In January 1999, the exchange rates of the individual currencies against the Euro will be fixed, and the Euro will be introduced. In January 2002, Euro notes and coins will be issued to replace the national currencies. "The 11 countries that comprise `Euroland' have a larger population than the U.S. by about 10%, but an economy that will be about 95% the size of that of the U.S. In terms of stock market capitalization, though, Euroland will comprise only about 16% of the world's stock market. "The introduction of the Euro marks yet another move toward integration in Europe, and it appears to be acting as a catalyst for change on the corporate front. Companies have realized that they will need to increase their competitiveness to survive in such a single currency market. Competition will increase because national trade barriers will be reduced; product standards are being unified, and goods and services will be priced in one currency. New market entrants should find it easier to establish themselves across borders, and companies in traditional `soft-currency countries' can no longer benefit from competitive devaluations. "Companies are reacting by cutting costs, restructuring their businesses to shed unprofitable parts, concentrating on core areas and looking at possible mergers or acquisitions in order to gain economies of scale or more synergy - and, hence, greater efficiency. "For the investor, this is good news, because those companies that are successful should be rewarded by rising share prices. Identifying such companies should therefore be a very important part of an investment strategy. "There are other important changes indirectly linked to the Euro. Not surprisingly, privatization of companies across the continent is booming during a time of fiscal austerity in the run-up to the European Monetary Union. That's because governments have been under pressure to lower their public debt levels in order to `join the club.' Successful privatizations can create a wide range of investment opportunities, because, in many cases, the result is the opening up of an industry to competition, an environment in which many companies can prosper. In addition, privatization helps to broaden equity markets, making them more representative of underlying economies and raising the profile of equities among investors. "I believe that these trends will continue. In fact, corporate restructuring and the creation of shareholder value have been powerful forces behind the strong performance of European stock markets over the past two years. At Fidelity, we have always paid special attention to companies that are managed in the interests of shareholders and will continue to do so in the future." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of European issuers FUND NUMBER: 301 TRADING SYMBOL: FIEUX START DATE: October 1, 1986 SIZE: as of April 30, 1998, more than $1.5 billion MANAGER: Sally Walden, since 1992; also manages various funds for non-U.S. investors; joined Fidelity in 1984 (checkmark) EUROPE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 FINLAND 3.9% UNITED STATES 8.2% ROW: 1, COL: 1, VALUE: 8.199999999999999 ROW: 1, COL: 2, VALUE: 28.5 ROW: 1, COL: 3, VALUE: 10.0 ROW: 1, COL: 4, VALUE: 8.9 ROW: 1, COL: 5, VALUE: 11.1 ROW: 1, COL: 6, VALUE: 4.6 ROW: 1, COL: 7, VALUE: 5.3 ROW: 1, COL: 8, VALUE: 7.9 ROW: 1, COL: 9, VALUE: 11.6 ROW: 1, COL: 10, VALUE: 3.9 FRANCE 11.6% UNITED KINGDOM 28.5% GERMANY 7.9% ITALY 5.3% NETHERLANDS 4.6% OTHER 11.1% SWITZERLAND 10.0% SWEDEN 8.9% AS OF OCTOBER 31, 1997 UNITED STATES 2.6% FRANCE 10.2% ROW: 1, COL: 1, VALUE: 2.6 ROW: 1, COL: 2, VALUE: 34.5 ROW: 1, COL: 3, VALUE: 9.4 ROW: 1, COL: 4, VALUE: 9.699999999999999 ROW: 1, COL: 5, VALUE: 10.9 ROW: 1, COL: 6, VALUE: 5.5 ROW: 1, COL: 7, VALUE: 3.9 ROW: 1, COL: 8, VALUE: 3.4 ROW: 1, COL: 9, VALUE: 9.9 ROW: 1, COL: 10, VALUE: 10.2 GERMANY 9.9% UNITED KINGDOM 34.5% IRELAND 3.4% ITALY 3.9% NETHERLANDS 5.5% OTHER 10.9% SWITZERLAND 9.4% SWEDEN 9.7% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 91.8 97.4 SHORT-TERM INVESTMENTS 8.2 2.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO SHELL TRANSPORT & TRADING CO. PLC (REG.) 2.7 3.1 (UNITED KINGDOM, OIL & GAS) NOVARTIS AG (REG.) 2.2 2.7 (SWITZERLAND, DRUGS & PHARMACEUTICALS) TELECOM ITALIA MOBILE SPA 2.2 2.0 (ITALY, TELEPHONE SERVICES) LLOYDS TSB GROUP PLC 2.0 2.1 (UNITED KINGDOM, BANKS) BRITISH PETROLEUM PLC ORD. 1.7 2.1 (UNITED KINGDOM, OIL & GAS) GLAXO WELLCOME PLC 1.6 1.8 (UNITED KINGDOM, DRUGS & PHARMACEUTICALS) HSBC HOLDINGS PLC ORD. 1.6 1.8 (UNITED KINGDOM, BANKS) TOTAL SA CLASS B 1.6 2.1 (FRANCE, OIL & GAS) TELECEL COMUNICACOES PESSOAIS SA 1.6 0.7 (PORTUGAL, CELLULAR) CREDIT SUISSE GROUP (REG.) 1.4 1.3 (SWITZERLAND, BANKS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 29.7 27.8 HEALTH 10.8 12.8 UTILITIES 9.6 8.6 ENERGY 7.3 8.9 MEDIA & LEISURE 6.6 5.9 DURABLES 4.2 7.2 RETAIL & WHOLESALE 4.1 5.5 INDUSTRIAL MACHINERY & EQUIPMENT 3.9 2.5 TECHNOLOGY 3.5 1.4 SERVICES 3.4 4.3 EUROPE INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 89.8% SHARES VALUE (NOTE 1) AUSTRIA - 0.5% OMV AG 54,100 $ 8,023,693 DENMARK - 0.5% International Service Systems AS, Series B 159,300 8,605,531 FINLAND - 3.9% Cultor OY Ord., Series 2 82,600 4,893,580 KCI (Konecranes International) 145,900 7,830,521 Nokia Corp. AB, Series A 173,400 11,640,572 Nokian Tyres Ltd. 114,580 6,620,084 Sampo Insurance Co. Ltd. 324,200 14,628,247 Tamro OYJ 554,900 3,969,387 Tieto Corp Class B 28,700 5,264,123 UPM-Kymmene Corp. 191,800 5,751,889 60,598,403 FRANCE - 11.6% Alcatel Alsthom Compagnie Generale d'Electricite SA 87,400 15,841,250 Accor SA 23,912 6,510,801 BIC 73,240 5,034,756 Carbonne-Lorraine 18,300 7,493,895 Club Mediterranee SA Ord. (a) 73,600 6,737,038 Credit Commercial de France Ord. 146,900 11,713,930 Castorama Dubois Investissements SA 45,700 7,546,441 Elf Sanofi SA 89,800 10,875,355 France Telecom SA 7,600 413,237 Genset SA (a) 82,500 7,592,823 Groupe Photo Services GPS 163,800 6,585,198 Hachette Filipacchi Medias SA 27,771 7,469,266 Nationale Elf Aquitaine 103,000 13,500,623 Peugeot SA Ord. 23,200 4,023,723 Renault SA Ord. (a) 91,300 4,231,697 Seita 164,900 7,396,462 Societe Generale Class A 103,050 21,433,441 Total SA Class B 207,778 24,680,002 Union Assurances Federale SA 77,794 12,161,169 181,241,107 GERMANY - 6.5% Adidas-Salomon AG 59,700 9,972,716 Allianz AG: (Reg.) 44,700 14,471,062 (RFD) (a) 1,161 353,620 BHF Bank AG 187,800 7,790,579 (BMW) Muenchen Bayerische Motorenwerke AG 9,224 10,385,282 Dresdner Bank AG Ord. 137,800 7,696,052 Gehe AG 154,910 8,086,649 Hannover Rueckversicherungs-AG 10,500 1,344,730 Hoechst AG Ord. 254,400 10,281,392 Mannesmann AG Ord. 26,340 21,794,777 Veba AG Ord. 138,310 9,203,210 101,380,069 IRELAND - 3.3% Bank of Ireland, Inc. 954,900 19,480,407 CRH PLC 706,060 10,027,323 IWP International (UK Reg.) 605,060 3,639,363 Independent Newspapers PLC 948,066 5,702,503 Irish Life PLC 763,100 7,012,622 Smurfit (Jefferson) Group PLC 1,577,400 5,754,040 51,616,258 SHARES VALUE (NOTE 1) ITALY - 4.7% Aeroporti di Roma Spa 36,000 $ 505,178 Banca Commerciale Italiana Spa 1,324,600 6,696,611 Credito Italiano Ord. 2,968,400 15,527,791 Istituto Nazionale Delle Assicurazioni Spa 5,537,000 16,506,355 Telecom Italia Mobile Spa 5,990,040 34,294,464 73,530,399 LUXEMBOURG - 0.0% Scandinavian Broadcasting Corp. (a) 23,600 749,300 NETHERLANDS - 4.6% AKZO Nobel NV 41,400 8,415,550 Ahold NV 180,500 5,624,165 ING Groep NV 225,650 14,586,505 Philips Electronics NV (Bearer) 94,800 8,532,000 Vendex International NV 139,300 8,928,869 VNU Ord. 594,100 19,216,648 Volmac Software Groep NV 107,600 7,077,897 72,381,634 NORWAY - 0.4% Schibsted AS, Series B 367,800 6,994,924 PORTUGAL - 3.0% BPI-SGPS SA (Reg.) 476,500 22,130,889 Telecel Comunicacoes Pessoais SA (a) 136,500 24,469,012 46,599,901 SPAIN - 3.4% Banco Bilbao Vizcaya SA Ord. (Reg.) 422,300 21,709,662 Corp Financiera Reunida-Cofir (a) 322,415 3,636,299 Mapfre Vida SA 162,300 8,088,128 Telefonica de Espana SA: Ord. 482,200 20,109,452 rights 5/7/98 (a) 482,200 379,424 53,922,965 SWEDEN - 8.9% Assa Abloy AB Class B 216,665 7,542,879 Astra AB Class A Free shares 769,366 15,773,015 Ericsson (L.M.) Telephone Co. Class B 145,100 7,462,715 ForeningsSparbanken AB, Series A 454,500 14,181,881 Hennes & Mauritz AB Class B 118,000 6,131,569 Incentive AB Class B 71,400 6,877,069 Mandamus AB rights 6/15/98 (a) 454,500 709,094 Nordbanken Holding AB 2,027,400 14,900,433 Securitas AB Class B 288,800 10,612,719 Skandia Foersaekrings AB 312,563 21,722,556 Scandic Hotels AB 238,600 9,075,636 Svenska Handelsbanken 318,400 14,410,026 Swedish Match Co. 3,001,700 10,372,577 139,772,169 SWITZERLAND - 10.0% Adecco SA (Bearer) 16,700 7,286,019 ABB AG (Bearer) 9,830 16,107,240 Credit Suisse Group (Reg.) 102,660 22,565,643 Julius Baer Holding AG 2,736 7,544,821 Kuoni Reisen Holding AG Class B (Reg.) 2,538 13,608,806 Novartis AG (Reg.) 21,340 35,251,582 Roche Holding AG 1,854 18,777,107 Swiss Bank Corp. (Reg.) 62,300 21,620,129 Swiss Reinsurance Corp. (Reg.) (a) 6,213 13,698,148 156,459,495 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - 28.5% Alliance & Leicester PLC 442,800 $ 6,184,981 Asda Group PLC 1,920,100 6,424,226 Barclays PLC Ord. 634,470 18,286,250 British Aerospace PLC 252,000 8,412,411 Barratt Developments PLC 1,331,775 7,131,541 Boots Co. PLC Class L (The) 658,830 10,198,663 British Petroleum PLC Ord. 1,660,014 26,196,193 British Telecommunications PLC Ord. 1,005,750 10,905,842 Capital Shopping Centres PLC 929,521 6,926,575 Cable & Wireless PLC Ord. 643,500 7,364,845 Carpetright PLC 210,600 1,217,472 Daily Mail & General Trust PLC Class A 178,900 7,577,270 Electrocomponents PLC 754,020 7,325,834 Flextech PLC (a) 598,880 4,953,013 Glaxo Wellcome PLC 896,400 25,311,217 Great Universal Stores PLC Ord Class A 527,800 8,033,637 HSBC Holdings PLC Ord. 789,500 24,891,353 Gallaher Group PLC 1,293,100 6,740,796 Granada Group PLC 454,300 7,818,158 Ladbroke Group PLC Ord. 1,115,300 6,126,070 Lloyds TSB Group PLC 2,122,100 31,750,890 London Insurance Market Investment Trust PLC 3,838,070 11,158,006 National Grid Co. PLC 695,745 4,487,060 Next PLC 666,400 5,511,435 Nycomed Amersham PLC 220,200 7,299,338 Orange PLC (a) 1,062,500 7,620,153 Prudential Corp. PLC 584,870 8,276,891 Peninsular & Oriental Steam Navigation Co. 586,300 8,644,882 Royal & Sun Alliance Insurance Group PLC 649,093 7,244,491 Rentokil Initial PLC 1,124,200 7,236,202 Scottish & Newcastle Brewers PLC 488,000 7,378,921 Scottish Media Group PLC 462,530 5,525,485 Shell Transport & Trading Co. PLC (Reg.) 5,602,300 41,653,437 Smiths Industries PLC Ord. 432,770 6,222,036 SmithKline Beecham PLC Ord. 1,582,420 18,851,059 Tesco PLC Ord. 743,720 6,958,601 Unilever PLC Ord. 1,655,100 17,615,223 Vodafone Group PLC 2,005,525 21,947,944 Wolseley PLC Ord. 507,450 3,556,720 Zeneca Group PLC Ord. 250,180 10,767,699 447,732,820 TOTAL COMMON STOCKS (Cost $944,901,644) 1,409,608,668 NONCONVERTIBLE PREFERRED STOCKS - 2.0% GERMANY - 1.4% Boss (Hugo) AG 5,280 9,702,099 Porsche AG 1,778 4,534,350 Wella AG 8,018 7,411,259 21,647,708 ITALY - 0.6% Telecom Italia Spa 1,723,900 9,082,937 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $17,684,741) 30,730,645 CASH EQUIVALENTS - 8.2% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $128,720,237) 128,720,237 $128,720,237 TOTAL INVESTMENTS IN SECURITIES - 100% (Cost $1,091,306,622) $ 1,569,059,550 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $445,391,077 and $146,272,288, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $2,644 for the period. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.9% Basic Industries 2.4 Cash Equivalents 8.2 Construction & Real Estate 1.8 Durables 4.2 Energy 7.3 Finance 29.7 Health 10.8 Industrial Machinery & Equipment 3.9 Media & Leisure 6.6 Nondurables 3.0 Retail & Wholesale 4.1 Services 3.4 Technology 3.5 Transportation 0.6 Utilities 9.6 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $1,091,640,804. Net unrealized appreciation aggregated $477,418,746, of which $490,617,572 related to appreciated investment securities and $13,198,826 related to depreciated investment securities. EUROPE FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE (COST $1,091,306,622) - $ 1,569,059,550 SEE ACCOMPANYING SCHEDULE CASH 2,013 RECEIVABLE FOR INVESTMENTS SOLD 1,124,762 RECEIVABLE FOR FUND SHARES SOLD 14,395,595 DIVIDENDS RECEIVABLE 6,821,827 INTEREST RECEIVABLE 515,914 REDEMPTION FEES RECEIVABLE 973 TOTAL ASSETS 1,591,920,634 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 57,879,126 PAYABLE FOR FUND SHARES REDEEMED 8,174,786 ACCRUED MANAGEMENT FEE 973,556 OTHER PAYABLES AND 623,590 ACCRUED EXPENSES TOTAL LIABILITIES 67,651,058 NET ASSETS $ 1,524,269,576 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,006,041,057 UNDISTRIBUTED NET INVESTMENT INCOME 5,744,094 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 34,761,824 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 477,722,601 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 41,762,056 $ 1,524,269,576 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($1,524,269,576 (DIVIDED BY) 41,762,056 SHARES) $36.50 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $36.50) $37.63
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 12,094,999 DIVIDENDS INTEREST 1,731,076 13,826,075 LESS FOREIGN TAXES WITHHELD (1,501,464) TOTAL INCOME 12,324,611 EXPENSES MANAGEMENT FEE $ 4,056,026 BASIC FEE PERFORMANCE ADJUSTMENT 228,875 TRANSFER AGENT FEES 1,330,861 ACCOUNTING FEES AND EXPENSES 303,095 NON-INTERESTED TRUSTEES' COMPENSATION 1,813 CUSTODIAN FEES AND EXPENSES 255,034 REGISTRATION FEES 175,639 AUDIT 24,777 LEGAL 2,717 REPORTS TO SHAREHOLDERS 59,183 MISCELLANEOUS 980 TOTAL EXPENSES BEFORE REDUCTIONS 6,439,000 EXPENSE REDUCTIONS (32,449) 6,406,551 NET INVESTMENT INCOME 5,918,060 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 36,142,447 FOREIGN CURRENCY TRANSACTIONS (616,747) 35,525,700 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 233,216,750 ASSETS AND LIABILITIES IN (97,262) 233,119,488 FOREIGN CURRENCIES NET GAIN (LOSS) 268,645,188 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 274,563,248 OTHER INFORMATION $ 671,160 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 1,250 DEFERRED SALES CHARGES WITHHELD $ 19,270 BY FDC EXPENSE REDUCTIONS $ 18,480 DIRECTED BROKERAGE ARRANGEMENTS TRANSFER AGENT CREDITS 13,969 $ 32,449
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 5,918,060 $ 13,404,635 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 35,525,700 79,961,346 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 233,119,488 86,807,048 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 274,563,248 180,173,029 DISTRIBUTIONS TO SHAREHOLDERS (11,392,134) (6,427,940) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (68,664,194) (46,294,939) TOTAL DISTRIBUTIONS (80,056,328) (52,722,879) SHARE TRANSACTIONS 456,667,695 355,908,188 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 78,862,444 51,814,504 COST OF SHARES REDEEMED (122,017,471) (311,301,709) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 413,512,668 96,420,983 REDEMPTION FEES 141,938 475,113 TOTAL INCREASE (DECREASE) IN NET ASSETS 608,161,526 224,346,246 NET ASSETS BEGINNING OF PERIOD 916,108,050 691,761,804 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $5,744,094 AND $12,950,679, RESPECTIVELY) $ 1,524,269,576 $ 916,108,050 OTHER INFORMATION SHARES SOLD 13,332,939 12,685,159 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 2,653,514 2,034,335 REDEEMED (3,724,970) (10,729,871) NET INCREASE (DECREASE) 12,261,483 3,989,623
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 31.05 $ 27.12 $ 23.51 $ 21.18 $ 18.43 $ 15.12 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .17 D .44 D .30 D .27 .18 .25 NET REALIZED AND UNREALIZED GAIN (LOSS) 8.02 5.44 4.23 2.37 2.65 3.35 TOTAL FROM INVESTMENT OPERATIONS 8.19 5.88 4.53 2.64 2.83 3.60 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.39) (.24) (.12) (.20) (.08) (.29) FROM NET REALIZED GAIN (2.35) (1.73) (.81) (.11) - - TOTAL DISTRIBUTIONS (2.74) (1.97) (.93) (.31) (.08) (.29) REDEMPTION FEES ADDED TO PAID IN CAPITAL - .02 .01 - - - NET ASSET VALUE, END OF PERIOD $ 36.50 $ 31.05 $ 27.12 $ 23.51 $ 21.18 $ 18.43 TOTAL RETURN B, C 28.39% 23.35% 20.14% 12.76% 15.41% 24.24% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,524,270 $ 916,108 $ 691,762 $ 492,867 $ 507,460 $ 528,929 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.20% A 1.19% 1.27% 1.18% E 1.35% 1.25% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.19% A, F 1.18% F 1.27% 1.18% 1.35% 1.25% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.10% A 1.53% 1.20% 1.12% .85% 1.44% PORTFOLIO TURNOVER RATE 28% A 57% 45% 38% 49% 76% AVERAGE COMMISSION RATE G $ .0429 $ .0344 $ .0299 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
EUROPE CAPITAL APPRECIATION PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY EUROPE CAPITAL APP 29.15% 48.51% 143.74% FIDELITY EUROPE CAPITAL APP 25.28% 44.06% 136.43% (INCL. 3.00% SALES CHARGE) MSCI EUROPE 29.24% 45.89% 131.58% EUROPEAN REGION FUNDS AVERAGE 26.03% 39.23% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on December 21, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Europe Index - an unmanaged market capitalization weighted index that is designed to represent the performance of developed stock markets in Europe. As of April 30, 1998, the index included over 550 equity securities of companies domiciled in 14 European companies. To measure how the fund's performance stacked up against its peers, you can compare it to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY EUROPE CAPITAL APP 48.51% 22.68% FIDELITY EUROPE CAPITAL APP 44.06% 21.82% (INCL. 3.00% SALES CHARGE) MSCI EUROPE 45.89% 21.25% EUROPEAN REGION FUNDS AVERAGE 39.23% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Europe Cap. Appreciation MS Europe Index (Net) 00341 MS002 1993/12/21 9700.00 10000.00 1993/12/31 9729.10 10087.27 1994/01/31 11145.30 10600.97 1994/02/28 10670.00 10225.54 1994/03/31 10786.40 9936.13 1994/04/30 11242.30 10347.57 1994/05/31 10825.20 9907.72 1994/06/30 10602.10 9803.69 1994/07/31 11145.30 10317.50 1994/08/31 11339.30 10644.74 1994/09/30 10941.60 10222.65 1994/10/31 11009.50 10667.98 1994/11/30 10534.20 10259.35 1994/12/31 10398.40 10317.67 1995/01/31 10272.30 10236.89 1995/02/28 10563.30 10468.83 1995/03/31 10786.40 10954.64 1995/04/30 11300.50 11304.96 1995/05/31 11475.10 11536.43 1995/06/30 11640.00 11645.19 1995/07/31 12241.40 12252.18 1995/08/31 11737.00 11778.54 1995/09/30 12086.20 12134.35 1995/10/31 11717.60 12077.04 1995/11/30 11649.70 12162.91 1995/12/31 11926.02 12548.36 1996/01/31 12005.13 12630.39 1996/02/29 12311.69 12860.48 1996/03/31 12509.47 13014.26 1996/04/30 12865.47 13108.42 1996/05/31 13152.25 13209.72 1996/06/30 13221.47 13355.17 1996/07/31 12954.47 13187.88 1996/08/31 13439.03 13579.22 1996/09/30 13735.69 13864.95 1996/10/31 13913.69 14186.83 1996/11/30 14793.81 14905.74 1996/12/31 15013.99 15194.47 1997/01/31 15389.62 15239.60 1997/02/28 15566.38 15445.33 1997/03/31 15842.58 15948.85 1997/04/30 15919.91 15873.58 1997/05/31 16638.02 16555.66 1997/06/30 17654.42 17388.08 1997/07/31 18460.91 18206.02 1997/08/31 17367.18 17169.01 1997/09/30 19201.12 18837.32 1997/10/31 18306.24 17917.87 1997/11/30 18328.34 18197.57 1997/12/31 18761.13 18866.87 1998/01/31 19553.49 19656.64 1998/02/28 21125.44 21197.92 1998/03/31 23016.89 22712.30 1998/04/30 23643.11 23157.91 IMATRL PRASUN SHR__CHT 19980430 19980506 115111 R00000000000056 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Europe Capital Appreciation Fund on December 21, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $23,643 - a 136.43% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International Europe Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $23,158 - a 131.58% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) EUROPE CAPITAL APPRECIATION FUND TALK: THE MANAGER'S OVERVIEW An interview with Kevin McCarey, Portfolio Manager of Fidelity Europe Capital Appreciation Fund Q. HOW DID THE FUND PERFORM, KEVIN? A. The fund did pretty well. For the six months that ended April 30, 1998, the fund returned 29.15%. This topped the 26.03% return of the European region funds average for the same period, according to Lipper Analytical Services. The Morgan Stanley Capital International Europe Index returned 29.24%. For the 12 months that ended April 30, 1998, the fund returned 48.51%. The Lipper average and Morgan Stanley index had 12 -month returns of 39.23% and 45.89%, respectively, as of April 30. Q. CAN YOU OUTLINE THE FACTORS THAT CONTRIBUTED TO THE FUND'S PERFORMANCE? A. The positive aspects that I've talked about in the past continued to have a strong influence on the performance of most European markets. Compared to six months ago, the drive towards a uniform currency is closer to becoming reality. As countries have met more and more of the requirements for joining the Europe Monetary Union (EMU), the resulting convergence of monetary and fiscal policies has benefited the overall investing climate. In addition, we continued to see a large number of company restructurings - either through mergers or acquisitions - and this was a positive development. Low interest rates and renewed consumer confidence also provided a nice investing backdrop. Of course, there were some obstacles along the way, with the biggest being the market crisis that enveloped Southeast Asian markets at the beginning of the period. This dilemma threw a few curveballs at me, as a lack of demand from Southeast Asia equated to falling commodity prices. In particular, the fund's oil-related positions hurt performance as the price of oil tumbled dramatically in late 1997. Another factor that detracted from the fund's return was my underweighting - relative to the index - in insurance-related stocks. This group performed very well during the period. Q. EUROPEAN ECONOMIES CONTINUED TO BE ON THE UPSWING DURING THE PERIOD. HOW DID THIS PLAY INTO YOUR STRATEGY? A. Compared to six months ago, I was more comfortable looking at stocks of companies that were sensitive to the ups and downs of the various European economies. I was attracted to certain commodity cyclicals - including paper and pulp companies - but also to non-commodity, cyclical areas such as advertising, hotel and leisure and media-related companies. Advertising has been a big worldwide trend, mostly because companies have more money to spend to highlight their products and services. One notable example within the portfolio is the global ad agency, Saatchi & Saatchi. With its strong reputation and foothold in many world regions, this position performed well for the fund. Q. DID THE ECONOMIC CRISES IN SOUTHEAST ASIA HAVE A DIRECT IMPACT ON EUROPEAN MARKETS? A. The problems in Southeast Asia affected most global markets, but I'd argue that the overall impact in Europe was more indirect. While Southeast Asia is a popular end market for many European products - and that end market has now become somewhat softer due to less demand - - we did experience surprising growth stories from Eastern Europe, Russia and Latin America. In terms of the fund itself, the most negative performance factor - that of falling oil prices - can be traced back to the problems in Southeast Asia. Q. WERE THERE ANY PARTICULAR INVESTMENT AREAS THAT OFFERED GOOD EARNINGS GROWTH? A. Telecommunications stocks had a strong period, particularly with the increased popularity of cellular phones. Cellular phone usage has risen rapidly as more and more people consider cell phones to be a necessity. Cellular phones now have longer battery lives and are lighter in weight. Also, with more cellular competition sprouting up throughout Europe, costs have been generally coming down. Features such as better voicemail capability and caller ID have also been well accepted. The fund held a number of stocks that reflected this trend, including Vodafone, Mannesman and Telecom Italia Mobile. Another big event that helped telecom stocks was that a number of markets opened to new competition in early 1998. Mannesman, which was one of the fund's 10 largest positions at the end of the period, was a play on this. Mannesman also has controlling interest in one of the major cellular companies in Germany. The company also has a history of creating strong businesses with sound marketing strategies. Q. THE FUND'S HEALTH CARE-RELATED POSITIONS DECLINED FROM AROUND 13% TO JUST OVER 5% DURING THE PERIOD. WHAT HAPPENED THERE? A. A lot of the reduction took place in the pharmaceuticals arena. Over the past couple years, many drug-stock companies have enjoyed great stock performance. As with most any other industry in Europe, this group has also seen a considerable amount of merger and acquisition activity and some companies got very big in size almost overnight. In the early part of the year, I felt that earnings expectations for many of these companies had gotten slightly ahead of reality. At the same time, there was much talk of several large-scale mergers and this drove share prices up. With my skepticism over earnings expectations in mind, I took advantage of this upward price movement and reduced many of the fund's pharmaceutical-related positions. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH DIDN'T? A. Accor, a global hotel company that made a number of internal improvements, benefited performance. NCL Holdings, which owns the third-largest cruise ship company in the world, also generated positive results. On the flip side, the fund's oil stocks Royal Dutch Petroleum and Shell Transport & Trading suffered, mainly due to the problems in Southeast Asia. Also, the fund's underweighting in insurance stocks relative to the index detracted from performance. Q. WHAT'S YOUR OUTLOOK? A. I expect the main drivers of European stock performance to continue. I don't think the restructuring theme has played itself out yet, as many companies still could use a bit of streamlining. Low unemployment and higher levels of consumer confidence could also be positives. At the same time, though, European markets have been on quite a roll for some time so I wouldn't be surprised to see some stock price consolidation. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. KEVIN MCCAREY EXPLORES THE ONGOING RESTRUCTURING TREND THROUGHOUT EUROPE: "Corporate restructurings continued to be a dominant theme throughout Europe and I think there's more to come. In general, companies have pursued three phases of restructuring. First, they've concentrated on improving the profitability of their existing businesses. Second, many are disposing of businesses that may not fit into their plans as well as they originally thought. Third, companies are also trying to make logical acquisitions, with the emphasis on logical. Companies don't want to commit time and resources to operate in a business which they may not understand fully. "One stock the fund held during the period - Vendex - is a good example of a company taking a proactive restructuring approach. Vendex is a Dutch company that operates retailing and temporary employment businesses. The company made a sizable acquisition in the services area, and is spinning that whole business off to shareholders. Then, the company recently made a food-retail acquisition and will spin off that business to shareholders, leaving the core, general retailing business intact. "European companies have been quick to study consolidation activity in other world markets and have taken note of what has worked and what hasn't worked. Companies are realizing that it's important to increase the market share in their main businesses and there's no shortage of U.S.-based examples. Coca-Cola, McDonald's and Philip Morris have all worked hard to gain market share and it shows in their profit margins. "One other interesting consolidation note concerns the number of high-profile cross-border deals we've seen lately. As more and more countries have met the requirements for EMU - and their fiscal and economic policies have converged - companies in different countries have felt more comfortable conducting business with one another. While this activity hasn't been confined to one industry, we have seen a good deal of activity in the finance, insurance and pharmaceutical areas." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of eastern and western European issuers FUND NUMBER: 341 TRADING SYMBOL: FECAX START DATE: December 21, 1993 SIZE: as of April 30, 1998, more than $637 million MANAGER: Kevin McCarey, since inception; manager, Fidelity Select Financial Services Portfolio, Fidelity Select Automotive Portfolio, 1988-1990; Fidelity Select Regional Banks Portfolio, 1986-1989; joined Fidelity in 1985 (checkmark) EUROPE CAPITAL APPRECIATION INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 4.0% ROW: 1, COL: 1, VALUE: 19.0 ROW: 1, COL: 2, VALUE: 9.6 ROW: 1, COL: 3, VALUE: 5.4 ROW: 1, COL: 4, VALUE: 10.4 ROW: 1, COL: 5, VALUE: 9.199999999999999 ROW: 1, COL: 6, VALUE: 3.6 ROW: 1, COL: 7, VALUE: 4.3 ROW: 1, COL: 8, VALUE: 8.4 ROW: 1, COL: 9, VALUE: 26.1 ROW: 1, COL: 10, VALUE: 4.0 FRANCE 19.0% UNITED KINGDOM 26.1% GERMANY 9.6% ITALY 5.4% SWITZERLAND 8.4% SWEDEN 4.3% NETHERLANDS 10.4% SPAIN 3.6% OTHER 9.2% AS OF OCTOBER 31, 1997 UNITED STATES 5.8% FRANCE 20.1% ROW: 1, COL: 1, VALUE: 20.1 ROW: 1, COL: 2, VALUE: 5.3 ROW: 1, COL: 3, VALUE: 3.1 ROW: 1, COL: 4, VALUE: 5.9 ROW: 1, COL: 5, VALUE: 8.5 ROW: 1, COL: 6, VALUE: 10.6 ROW: 1, COL: 7, VALUE: 4.5 ROW: 1, COL: 8, VALUE: 6.5 ROW: 1, COL: 9, VALUE: 29.7 ROW: 1, COL: 10, VALUE: 5.8 UNITED KINGDOM 29.7% GERMANY 5.3% IRELAND 3.1% ITALY 5.9% SWITZERLAND 6.5% NETHERLANDS 8.5% SWEDEN 4.5% OTHER 10.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 96.0 94.1 BONDS 0.0 0.1 SHORT-TERM INVESTMENTS 4.0 5.8 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ALCATEL ALSHTOM COMPAGNIE GENERALE 2.4 1.9 D'ELECTRICITE SA (FRANCE, ELECTRICAL EQUIPMENT) BRITISH AEROSPACE PLC 2.1 1.8 (UNITED KINGDOM, AEROSPACE & DEFENSE) NCL HOLDINGS AS 1.9 0.7 (NORWAY, ENTERTAINMENT) PHILIPS ELECTRONICS NV (BEARER) 1.9 0.7 (NETHERLANDS, ELECTRICAL EQUIPMENT) CREDIT SUISSE GROUP (REG.) 1.9 0.4 (SWITZERLAND, BANKS) UNILEVER PLC ORD. 1.8 1.2 (UNITED KINGDOM, HOUSEHOLD PRODUCTS) SHELL TRANSPORT & TRADING CO. PLC (REG.) 1.7 4.0 (UNITED KINGDOM, OIL & GAS) ACCOR SA 1.7 0.6 (FRANCE, LODGING & GAMING) MANNESMANN AG ORD. 1.7 0.2 (GERMANY, INDUSTRIAL MACHINERY & EQUIPMENT) PHILIPS ELECTRONICS NV WARRANTS 1.6 0.0 6/30/98 (NETHERLANDS, ELECTRICAL EQUIPMENT) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 23.6 19.6 UTILITIES 8.8 5.2 INDUSTRIAL MACHINERY & EQUIPMENT 8.5 4.6 NONDURABLES 7.7 4.0 MEDIA & LEISURE 6.4 5.2 ENERGY 6.1 12.5 HEALTH 5.4 13.3 DURABLES 5.3 5.4 BASIC INDUSTRIES 5.0 5.7 CONSTRUCTION & REAL ESTATE 4.8 5.5 EUROPE CAPITAL APPRECIATION INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 90.5% SHARES VALUE (NOTE 1) CANADA - 0.1% Canadian Fracmaster Ltd. (a) 47,900 $ 620,948 FINLAND - 3.0% Merita Ltd., Series A 658,000 4,393,103 Metsa-Serla Ltd. Class B 798,200 8,271,882 Nokia Corp. AB sponsored ADR 86,400 5,778,000 18,442,985 FRANCE - 19.0% Accor SA 39,700 10,809,586 Alcatel Alsthom Compagnie Generale d'Electricite SA 84,000 15,225,000 Axa SA 42,500 4,984,633 Atos SA (a) 7,500 1,252,180 BQE National Paris Ord. 26,600 2,240,419 Bongrain SA 6,000 3,087,964 Cap Gemini Sogeti SA 49,000 6,357,505 Christian Dior SA 21,500 2,910,956 Coflexip sponsored ADR 75,400 5,372,250 Compagnie Generale de Geophysique SA sponsored ADR (a) 12,000 1,742,337 Credit Commercial de France Ord. 40,000 3,189,634 Generale des Eaux, Cie 27,000 5,014,702 Groupe Danone 23,000 5,425,700 Michelin SA (Compagnie Generale des Etablissements) Class B 69,200 4,355,824 Nationale Elf Aquitaine 70,500 9,240,718 NRJ SA 27,960 4,761,027 Pathe SA 6,064 1,317,670 Pechiney SA Class A 32,202 1,439,046 Renault SA Ord. (a) 120,000 5,561,924 Rhone Poulenc SA Class A 38,400 1,876,143 Societe Generale Class A 37,500 7,799,651 Total SA Class B 82,000 9,740,012 Unibail (a) 18,000 2,571,642 Union Assurances Federale SA 16,800 2,626,265 118,902,788 GERMANY - 7.0% Allianz AG (Reg.) 21,000 6,798,485 BHF Bank AG 232,200 9,632,441 BASF AG 45,000 2,039,646 Daimler-Benz AG Ord. 20,000 1,980,623 Deutsche Lufthansa AG 256,000 6,058,244 Fresenius Medical Care AG sponsored ADR (a) 100 2,306 Hoechst AG Ord. 55,000 2,222,785 Hornbach Baumarket AG (Bearer) 18,500 844,702 Mannesmann AG Ord. 12,500 10,343,004 Philipp Holzmann AG (a) 13,200 3,954,340 43,876,576 IRELAND, - 1.6% Bank of Ireland, Inc. 190,000 3,876,089 Elan Corp. PLC ADR (a) 60,000 3,727,500 Smurfit (Jefferson) Group PLC 675,000 2,462,265 10,065,854 ITALY - 2.5% Assicurazioni Generali Spa 75,000 2,244,881 Banca Commerciale Italiana Spa 475,000 2,401,397 Credito Italiano Ord. 880,000 4,603,307 Finmeccanica Spa (a) 1,530,000 2,250,330 Istituto Nazionale Delle Assicurazioni Spa 720,000 2,146,393 Toro Assicurazioni Spa Ord. 96,500 1,687,730 15,334,038 SHARES VALUE (NOTE 1) LUXEMBOURG - 0.6% Stolt Comex Seaway SA (a) 122,000 $ 3,965,000 NETHERLANDS - 10.4% ASM Lithography Holding NV (a) 1,000 91,625 AKZO Nobel NV 28,000 5,691,676 Benckiser NV Class B 30,000 1,749,345 Fortis Amev NV 134,000 7,833,622 ING Groep NV 116,300 7,517,884 Koninklijke KNP BT NV 95,000 2,607,696 Melia Inversiones Americanas NV (a) 2,400 119,603 Philips Electronics NV: warrants 6/30/98 (a) 144,000 10,255,700 (Bearer) 132,000 11,880,000 PolyGram NV Ord. 48,500 2,000,544 Samas-Groep NV 93,000 5,763,341 Vendex International NV 34,000 2,179,336 Vedior NV 145,000 4,403,284 VNU Ord. 96,000 3,105,198 65,198,854 NORWAY - 1.9% NCL Holdings AS (a) 2,501,000 12,025,166 PORTUGAL - 1.5% BPI-SGPS SA (Reg.) 125,000 5,805,585 Portugal Telecom SA 33,400 1,793,465 Telecel Comunicacoes Pessoais SA (a) 10,000 1,792,602 9,391,652 RUSSIA - 0.5% Vimpel Communications sponsored ADR (a) 60,000 3,240,000 SPAIN - 3.6% Actividades de Construccion y Servicios (ACS) SA 103,000 3,376,938 Corporacion Mapfre Compania Internacional de Reaseguros SA (Reg.) 80,000 3,136,946 Iberdrola SA 185,000 2,972,034 Portland Valderrivas SA Ord. 16,900 2,072,260 Repsol SA Ord. 37,000 2,025,835 Telefonica de Espana SA Ord. 210,000 8,757,746 22,341,759 SWEDEN - 4.3% Astra AB Class A Free shares 425,000 8,713,059 Hemkopskedjan AB, Series B 225,000 3,060,692 Incentive AB Class A 46,000 4,448,399 Industrial-Matematik International Corp. (a) 150,000 3,337,500 Svenska Handelsbanken 76,000 3,439,579 Volvo AB Class B 130,000 3,867,051 26,866,280 SWITZERLAND - 8.4% Credit Suisse Group (Reg.) 53,500 11,759,808 Forbo Holding AG (Reg.) (a) 5,300 2,718,311 Julius Baer Holding AG 3,050 8,410,711 Moevenpick Holding AG (a) 6,400 3,687,471 Nestle SA (Reg.) 5,005 9,701,292 Novartis AG (Reg.) 4,150 6,855,392 Swiss Bank Corp. (Reg.) 22,400 7,773,530 Von Roll Holding AG (a) 55,000 1,813,428 52,719,943 UNITED KINGDOM - 26.1% Alpha Airports Group PLC 587,100 922,071 ARM Holdings PLC sponsored ADR 2,400 96,900 BAT Industries PLC Ord. 480,000 4,523,190 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - CONTINUED Britax International PLC 745,000 $ 2,016,489 Bank of Scotland 360,000 4,420,937 Barclays PLC Ord. 108,000 3,112,700 British Aerospace PLC 400,000 13,353,034 British Petroleum PLC Ord. 182,369 2,877,912 British Telecommunications PLC Ord. 337,500 3,659,679 Commercial Union PLC 440,000 8,226,351 Cordiant PLC 650,000 1,270,643 Corporate Services Group PLC 400,000 1,610,651 Courtaulds Textiles PLC 340,000 1,823,511 Devro PLC 877,000 7,956,533 Dr Solomons Group PLC sponsored ADR (a) 88,000 2,618,000 Glaxo Wellcome PLC 47,500 1,341,235 HSBC Holdings PLC Ord. 245,000 7,724,359 Hazlewood Foods PLC Ord. 1,125,000 3,571,335 Iceland Group PLC 24,700 91,823 Johnson Matthey PLC 160,000 1,620,008 KBC Advanced Technologies PLC 225,000 1,296,959 Kingfisher PLC 150,000 2,721,733 Lloyds TSB Group PLC 570,000 8,528,348 Mayflower Corp. 535,000 2,163,185 Minerva PLC 520,300 2,042,896 Misys PLC Ord. 48,167 2,313,726 National Westminster Bank PLC Ord. 70,000 1,399,963 Next PLC 202,500 1,674,768 Pearson, PLC 160,000 2,504,863 Rentokil Initial PLC 190,000 1,222,984 Saatchi & Saatchi PLC 3,524,200 9,303,409 Scholl PLC 247,900 1,553,217 Shell Transport & Trading Co. PLC (Reg.) 1,470,000 10,929,538 Siebe PLC 135,000 3,013,455 SmithKline Beecham PLC Ord. 607,438 7,236,290 Somerfield PLC 748,700 4,232,265 Ultra Electronics Holdings PLC 310,000 2,097,689 Unilever PLC Ord. 1,053,000 11,207,075 Vodafone Group PLC 602,120 6,589,434 Wickes PLC 800,000 4,704,973 Williams Holdings PLC Class L 185,000 1,418,760 Yorkshire Water PLC 340,000 2,726,746 163,719,637 UNITED STATES OF AMERICA - 0.0% Global Telesystems Group, Inc. (a) 3,500 164,500 TOTAL COMMON STOCKS (Cost $457,691,755) 566,875,980 NONCONVERTIBLE PREFERRED STOCKS - 5.5% GERMANY - 2.6% Dyckerhoff AG (non-vtg.) 8,500 2,924,996 Porsche AG 1,100 2,805,279 SAP AG (Systeme Anwendungen Produkte) 15,000 7,684,170 Wella AG 3,079 2,846,005 16,260,450 ITALY - 2.9% Telecom Italia Spa 1,941,800 10,231,015 Telecom Italia Mobile Spa de Risp 2,175,000 7,830,002 18,061,017 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $28,014,183) 34,321,467 CASH EQUIVALENTS - 4.0% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $25,351,590) 25,351,590 $25,351,590 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $511,057,528) $ 626,549,037 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $477,197,771 and $351,400,561, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $10,741 for the period. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Aerospace & Defense 2.1% Basic Industries 5.0 Cash Equivalents 4.0 Construction & Real Estate 4.8 Durables 5.3 Energy 6.1 Finance 23.6 Health 5.4 Holding Companies 0.4 Industrial Machinery & Equipment 8.5 Media & Leisure 6.4 Nondurables 7.7 Retail & Wholesale 3.2 Services 2.9 Technology 4.7 Transportation 1.1 Utilities 8.8 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $511,139,201. Net unrealized appreciation aggregated $115,409,836, of which $121,847,020 related to appreciated investment securities and $6,437,184 related to depreciated investment securities. EUROPE CAPITAL APPRECIATION FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 626,549,037 (COST $511,057,528) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 42,956,143 RECEIVABLE FOR FUND SHARES SOLD 3,853,487 DIVIDENDS RECEIVABLE 2,305,439 INTEREST RECEIVABLE 183,941 REDEMPTION FEES RECEIVABLE 20,985 TOTAL ASSETS 675,869,032 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 34,311,080 PAYABLE FOR FUND SHARES REDEEMED 3,254,595 ACCRUED MANAGEMENT FEE 386,580 OTHER PAYABLES AND ACCRUED EXPENSES 152,379 TOTAL LIABILITIES 38,104,634 NET ASSETS $ 637,764,398 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 496,604,595 UNDISTRIBUTED NET INVESTMENT INCOME 1,383,717 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 24,338,924 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 115,437,162 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 34,474,997 SHARES OUTSTANDING $ 637,764,398 NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($637,764,398 (DIVIDED BY) 34,474,997 SHARES) $18.50 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $18.50) $19.07
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 3,659,944 DIVIDENDS INTEREST 478,189 4,138,133 LESS FOREIGN TAXES WITHHELD (408,893) TOTAL INCOME 3,729,240 EXPENSES MANAGEMENT FEE $ 1,606,433 BASIC FEE PERFORMANCE ADJUSTMENT 4,939 TRANSFER AGENT FEES 515,176 ACCOUNTING FEES AND EXPENSES 161,385 NON-INTERESTED TRUSTEES' COMPENSATION 714 CUSTODIAN FEES AND EXPENSES 51,100 REGISTRATION FEES 52,355 AUDIT 25,475 LEGAL 1,094 REPORTS TO SHAREHOLDERS 24,292 MISCELLANEOUS 331 TOTAL EXPENSES BEFORE REDUCTIONS 2,419,002 EXPENSE REDUCTIONS (73,480) 2,345,522 NET INVESTMENT INCOME 1,383,718 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 25,071,292 FOREIGN CURRENCY TRANSACTIONS (278,965) 24,792,327 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 85,420,976 ASSETS AND LIABILITIES IN (77,728) 85,343,248 FOREIGN CURRENCIES NET GAIN (LOSS) 110,135,575 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 111,519,293 OTHER INFORMATION $ 530,183 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 410 EXPENSE REDUCTIONS $ 73,008 DIRECTED BROKERAGE ARRANGEMENTS TRANSFER AGENT CREDITS 472 $ 73,480
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 1,383,718 $ 4,455,207 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 24,792,327 62,599,749 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 85,343,248 15,678,969 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 111,519,293 82,733,925 DISTRIBUTIONS TO SHAREHOLDERS (3,530,573) (2,855,514) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (46,118,471) (16,015,689) TOTAL DISTRIBUTIONS (49,649,044) (18,871,203) SHARE TRANSACTIONS 232,598,200 297,299,863 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 48,775,275 18,146,164 COST OF SHARES REDEEMED (77,677,144) (177,761,244) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 203,696,331 137,684,783 REDEMPTION FEES 148,443 310,115 TOTAL INCREASE (DECREASE) IN NET ASSETS 265,715,023 201,857,620 NET ASSETS BEGINNING OF PERIOD 372,049,375 170,191,755 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $1,383,717 AND $4,579,952, RESPECTIVELY) $ 637,764,398 $ 372,049,375 OTHER INFORMATION SHARES SOLD 13,318,878 20,196,556 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 3,398,974 1,399,089 REDEEMED (4,700,765) (11,229,699) NET INCREASE (DECREASE) 12,017,087 10,365,946
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED OCTOBER 31, DECEMBER 21, 1993 APRIL 30, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 NET ASSET VALUE, BEGINNING OF PERIOD $ 16.57 $ 14.07 $ 12.08 $ 11.35 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .05 D .20 D .22 G .23 .08 D NET REALIZED AND UNREALIZED GAIN (LOSS) 4.12 3.81 2.00 .50 1.27 TOTAL FROM INVESTMENT OPERATIONS 4.17 4.01 2.22 .73 1.35 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.16) (.23) (.23) - - FROM NET REALIZED GAIN (2.09) (1.29) - - - TOTAL DISTRIBUTIONS (2.25) (1.52) (.23) - - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .01 - - - NET ASSET VALUE, END OF PERIOD $ 18.50 $ 16.57 $ 14.07 $ 12.08 $ 11.35 TOTAL RETURN B, C 29.15% 31.57% 18.74% 6.43% 13.50% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 637,764 $ 372,049 $ 170,192 $ 194,433 $ 352,855 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.14% A 1.10% 1.33% 1.36% 1.54% A RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.10% A, E 1.07% E 1.30% E 1.36% 1.54% A RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .65% A 1.33% 1.66% 1.45% .79% A PORTFOLIO TURNOVER RATE 171% A 189% 155% 176% 317% A AVERAGE COMMISSION RATE F $ .0281 $ .0254 $ .0245
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.04 PER SHARE.
FRANCE PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY FRANCE 31.02% 38.10% 86.18% FIDELITY FRANCE 27.09% 33.96% 80.59% (INCL. 3.00% SALES CHARGE) SBF 250 34.93% 41.21% 80.99% EUROPEAN REGION FUNDS AVERAGE 26.03% 39.23% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Societe des Bourses Francaises 250 Index (SBF 250 Index) - a market capitalization weighted index of the stocks of the 250 largest companies in the French market. To measure how the fund's performance stacked up against its peers, you can compare the fund's performance to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analyticale Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY FRANCE 38.10% 28.28% FIDELITY FRANCE 33.96% 26.72% (INCL. 3.00% SALES CHARGE) SBF 250 41.21% 26.83% EUROPEAN REGION FUNDS AVERAGE 39.23% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND France SBF 250 00345 EX001 1995/11/01 9700.00 10000.00 1995/11/30 9515.70 9996.87 1995/12/31 9952.70 10331.57 1996/01/31 10381.19 10618.07 1996/02/29 10799.95 11028.30 1996/03/31 11150.53 11258.88 1996/04/30 11403.73 11466.65 1996/05/31 11647.19 11517.59 1996/06/30 11803.01 11777.11 1996/07/31 11559.54 11522.35 1996/08/31 11393.99 11290.00 1996/09/30 11617.98 11688.17 1996/10/31 11919.87 11888.32 1996/11/30 12299.67 12521.77 1996/12/31 12484.65 12692.23 1997/01/31 13045.52 12947.26 1997/02/28 13180.55 13046.89 1997/03/31 13585.62 13392.49 1997/04/30 13076.68 12816.85 1997/05/31 12889.72 12695.77 1997/06/30 13855.67 13730.74 1997/07/31 14125.72 14007.70 1997/08/31 13388.28 13106.00 1997/09/30 14707.37 14283.43 1997/10/31 13782.97 13413.94 1997/11/30 13814.13 13600.74 1997/12/31 14290.14 14013.96 1998/01/31 14665.89 14539.07 1998/02/28 15724.84 15771.19 1998/03/31 17410.05 17395.62 1998/04/30 18059.09 18099.22 IMATRL PRASUN SHR__CHT 19980430 19980506 114239 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity France Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $18,059 - an 80.59% increase on the initial investment. For comparison, look at how the Societe des Bourses Francaises 250 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $18,099 - an 80.99% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) FRANCE FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Effective on May 19, 1998 - after the period covered by this report - Alexandra Edzard became Portfolio Manager of Fidelity France Fund. Q. HOW DID THE FUND PERFORM, ALEXANDRA? A. For the six months that ended April 30, 1998, the fund returned 31.02%, compared to the 34.93% return of the Societe des Bourses Francaises (SBF) 250 Index and the European region funds average return of 26.03%, as monitored by Lipper Analytical Services. For the one-year period, the fund returned 38.10%, compared to the SBF 250's return of 41.21% and the Lipper European region funds average return of 39.23%. Q. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT DURING THE PERIOD? A. France's economic recovery became clearer to investors in early 1998 and the stock market rallied, outperforming most other European markets. The favorable factors included a pick-up in construction and real estate activity and increased consumer spending. In addition, low interest rates and the French government's decision to give more favorable tax treatment to returns from stock investments compared to bond investments helped the market. Q. WHAT WERE THE KEY FACTORS INFLUENCING PERFORMANCE? A. The fund's healthy returns were helped by good exposure to domestic cyclical companies, which tend to do well during a period of economic recovery. The emphasis on heavy industries supported the performance. The fund was hurt however, by major investments in oil company stocks. In addition, shares of France Telecom staged a very large rally during the six months. This single stock accounts for 8% of the SBF 250 Index, but the fund was underweighted with just 3% at the start of the rally. The fund slightly underperformed the SBF 250 Index because it owned some smaller-company stocks during a time when larger-company stocks tended to do better, although some of the fund's small-company stocks did very well. Q. WHAT WERE THE PRINCIPAL STRATEGIES DURING THE SIX-MONTH PERIOD? A. We focused on cyclical companies and finance companies - both very strong performing areas because of the recovering economy. Within cyclical industries, for example, construction and real estate accounted for 8.5% of portfolio investments at the end of the period, while consumer goods accounted for 7.8%, industrial machinery 7.0% and technology 7.0%. We found particularly good opportunities in building materials and construction, as well as electrical equipment and technology companies such as Alcatel Alsthom and Schneider. Several technology stocks did very well, including Cap Gemini, Atos and Cegid. These three software companies are all involved in providing solutions to companies that need to adapt their computer dating systems for calendar changes beginning in the year 2000. Q. THE FINANCE INDUSTRY HAD THE LARGEST EMPHASIS AT THE END OF THE PERIOD, WITH 10.7% OF PORTFOLIO INVESTMENTS. WHAT WAS THE STRATEGY HERE? A. In general, the finance sector was helped by the economic recovery and relatively low interest rates. We focused on both banks and insurance companies. Most of the banks in the finance sector did very well, with Societe Generale, the fund's third-largest holding at the end of the period, having particularly strong performance. Axa, the global insurance company based in France, also helped the fund's returns significantly. Q. WHAT OTHER COMPANIES WERE STRONG CONTRIBUTORS? A. The investment in Sodexho, a major French catering company, was very successful. This company acquired Marriott Catering Services in the United States, making it the world's largest catering company. Genset, a biotechnology company involved in genetic research, was another good-performing stock. Bouygues, a construction company, also helped the fund's returns significantly. This company benefited both from the health of its underlying businesses - including construction, road building and media - and from market expectations during the period that it was an acquisition candidate. The company's assets were worth significantly more than the stock value of the company. Q. WERE THERE ANY DISAPPOINTMENTS? A. The major disappointment was in oil stocks, where we had a considerable weighting because energy stocks tend to do well in economic recoveries. At the end of the period, energy stocks accounted for 8.3% of portfolio investments. The slump in world oil prices hurt this industry. The fund's two largest holdings at the end of the period, Elf Aquitaine and Total, are oil companies that were affected by the problems in the energy industry. Q. WHAT IS YOUR OUTLOOK? A. There are signs that economic growth in France is broadening from the export sector to include the consumer sector, which is a positive development. At the same time, inflation remains subdued. This implies that there should not be much upward pressure on interest rates or bond yields. The general market expectation is that interest rates could end the year at around 4% to 4.5%. Overall, this background has tended to be benign for equities. On the corporate front, the outlook for profit growth remains favorable. A key item in the market continues to be corporate restructuring, which is taking the form of cost-cutting in general, and of mergers and acquisitions in particular. The broadening in economic growth may also improve the outlook for small- or medium-sized companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. ALEXANDRA EDZARD ON HER INVESTMENT STYLE: "In managing the fund, I emphasize strong company research. I look for positive changes that can improve a corporation's profitability, trying to determine the quality, strategic direction and motivation of corporate management. "I take time to understand the businesses in which I invest, trying to be patient in order to give my investment ideas time to work. I focus on what I'm familiar with, avoiding speculation about the unknown. I look for changes that are taking place and how they may affect an industry or company, either positively or negatively. "In selecting stocks, I invest only in companies managed by people who clearly understand their business. I look for those companies whose positions will improve from consolidation within their industries, trying to identify companies that will benefit from corporate restructuring or from improving fundamentals and earnings potential. I like to invest in companies with strong balance sheets and positive cash flow, as they have the financial flexibility to initiate positive changes. In this analysis, I rely on Fidelity's strong research team to give me insight and information. "In today's era of consolidation, I want to emphasize companies that are focusing on what they understand and what they are good at. This means avoiding companies that are using their positive cash flow to make unproductive acquisitions in non-core businesses. "I also emphasize companies that recognize the importance of shareholders, especially in terms of communication. I have found that companies adapting to a broader range of shareholders seek better returns on capital, and demonstrate the courage to make major adjustments in their business portfolio, rather than just small-scale cost reductions. "I look to invest in companies with pro-active managements who believe that change is important in improving corporate earnings. I also try to talk with a company's line managers to assess their competitive position and to determine long-term corporate strategy. In judging a company's managers, I look at their past records, their attitude toward the business, their motivation and their appreciation of their company's competitive position." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of French issuers FUND NUMBER: 345 TRADING SYMBOL: FRANX START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $8 million MANAGER: Alexandra Edzard since May 1998; manager Fidelity Germany Fund 1996; joined Fidelity in 1994 (checkmark) FRANCE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 17.0% ROW: 1, COL: 1, VALUE: 83.0 ROW: 1, COL: 2, VALUE: 17.0 FRANCE 83.0% AS OF OCTOBER 31, 1997 UNITED STATES 5.7% ROW: 1, COL: 1, VALUE: 94.3 ROW: 1, COL: 2, VALUE: 5.7 FRANCE 94.3% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 79.6 76.1 BONDS 3.4 18.2 SHORT-TERM INVESTMENTS 17.0 5.7 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO NATIONALE ELF AQUITAINE 4.4 6.2 (OIL & GAS) TOTAL SA CLASS B 3.9 3.7 (OIL & GAS) SOCIETE GENERALE DE PARIS (RFD) 3.8 0.0 (BANKS) LVMH (MOET-HENNESSY LOUIS VUITTON) 3.6 1.2 SPONSORED ADR (BEVERAGES) FRANCE TELECOM SA 3.6 3.9 (TELEPHONE SERVICES) ALCATEL ALSTHOM COMPAGNIE GENERALE 3.2 0.0 D'ELECTRICITE SA (ELECTRICAL EQUIPMENT) GROUPE DANONE 2.6 0.0 (FOODS) CREDIT COMMERCIAL DE FRANCE ORD. 2.1 3.4 (BANKS) AXA SA 2.0 0.0 (INSURANCE) GENERALE DES EAUX, CIE 2.0 0.0 (WATER) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 10.7 11.3 CONSTRUCTION & REAL ESTATE 8.5 13.1 ENERGY 8.3 9.9 NONDURABLES 7.8 5.3 INDUSTRIAL MACHINERY & EQUIPMENT 7.0 6.2 TECHNOLOGY 7.0 5.3 HEALTH 6.2 10.0 UTILITIES 5.6 3.9 MEDIA & LEISURE 5.5 6.7 DURABLES 4.6 8.4 FRANCE INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 78.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.9% Industrielle d'Aviation Latecoere SA 600 $ 84,226 BASIC INDUSTRIES - 1.3% CHEMICALS & PLASTICS - 1.3% L'Air Liquide 700 129,080 CONSTRUCTION & REAL ESTATE - 8.5% BUILDING MATERIALS - 1.9% IMETAL SA Ord. 400 51,898 Lafarge SA 600 56,616 Lafarge SA (RFD) 31 2,843 Lapeyre SA 1,000 75,920 187,277 CONSTRUCTION - 4.4% Bouygues Offshore SA 1,500 65,537 Compagnie de Saint Gobain 1,050 174,782 Groupe GTM 1,200 94,493 (SGE) Societe Generale d'Entreprises SA (a) 1,000 38,957 Technip SA 360 45,692 419,461 ENGINEERING - 1.0% Bouygues 600 94,593 REAL ESTATE - 1.2% Societe Fonciere Lyonnaise SA 300 45,901 Unibail (a) 500 71,435 117,336 TOTAL CONSTRUCTION & REAL ESTATE 818,667 DURABLES - 4.6% AUTOS, TIRES, & ACCESSORIES - 2.6% Peugeot SA Ord. 600 104,062 Valeo SA 1,500 149,016 253,078 CONSUMER DURABLES - 0.7% l'Europeenne d'Extincteurs 800 66,849 CONSUMER ELECTRONICS - 0.5% BIC 700 48,120 HOME FURNISHINGS - 0.4% Strafor Facom SA 380 34,720 TEXTILES & APPAREL - 0.4% Alain Manoukian SA 1,000 37,877 TOTAL DURABLES 440,644 ENERGY - 8.3% OIL & GAS - 8.3% Nationale Elf Aquitaine 3,255 426,646 Total SA Class B 3,150 374,159 800,805 FINANCE - 10.7% BANKS - 7.0% Credit Commercial de France Ord. 2,520 200,947 Paribas SA (Cie Financiere) Class A 1,000 106,321 Societe Generale de Paris (RFD)(a) 1,770 364,615 671,883 SHARES VALUE (NOTE 1) INSURANCE - 3.7% Assurances Generales (Reg.) 2,600 $ 164,133 Axa SA 1,680 197,040 361,173 TOTAL FINANCE 1,033,056 HEALTH - 4.8% DRUGS & PHARMACEUTICALS - 4.0% Genset SA (a) 1,200 110,441 Rhone Poulenc SA Class A 3,150 153,902 Synthelabo 800 120,276 384,619 MEDICAL EQUIPMENT & SUPPLIES - 0.8% Essilor International SA 200 80,738 TOTAL HEALTH 465,357 HOLDING COMPANIES - 1.7% Lagardere S.C.A. (Reg.) 3,000 114,627 Marine Wendel SA 300 53,327 167,954 INDUSTRIAL MACHINERY & EQUIPMENT - 7.0% ELECTRICAL EQUIPMENT - 4.1% Alcatel Alsthom Compagnie Generale d'Electricite SA 1,680 304,500 Equipements et Composants pour l'Industrie Automobile (ECIA) 300 94,294 398,794 INDUSTRIAL MACHINERY & EQUIPMENT - 2.9% Carbone-Lorraine (Le) (RFD) (a) 400 164,665 Entrelec SA (a) 800 43,592 Euraltech SA (a) 200 26,614 Sidel SA 600 45,851 280,722 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 679,516 MEDIA & LEISURE - 3.5% BROADCASTING - 0.4% NRJ SA 240 40,867 PUBLISHING - 1.4% Hachette Filipacchi Medias SA 504 135,555 RESTAURANTS - 1.7% Sodexho Alliance SA 887 162,237 TOTAL MEDIA & LEISURE 338,659 NONDURABLES - 7.8% BEVERAGES - 3.6% LVMH (Moet-Hennessy Louis Vuitton) sponsored ADR 1,680 345,517 FOODS - 2.6% Groupe Danone 1,050 247,695 HOUSEHOLD PRODUCTS - 1.6% L'Oreal Co. Ord. 324 154,478 TOTAL NONDURABLES 747,690 RETAIL & WHOLESALE - 4.4% GENERAL MERCHANDISE STORES - 2.5% Bricorama SA 1,000 54,822 Galeries Lafayette SA 210 184,201 239,023 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 1.9% Pinault Printemps SA 160 $ 119,026 Castorama Dubois Investissements SA 400 66,052 185,078 TOTAL RETAIL & WHOLESALE 424,101 SERVICES - 3.5% ADVERTISING - 2.0% Expand SA (a) 600 140,045 Havas Advertising SA 300 53,576 193,621 SERVICES - 1.5% Publicis SA 200 23,989 Sidergie SA 180 43,329 Suez Lyonnaise des Eaux 450 76,252 143,570 TOTAL SERVICES 337,191 TECHNOLOGY - 6.3% COMPUTER SERVICES & SOFTWARE - 4.7% Atos SA (a) 840 140,244 Cegid SA 1,050 180,538 Cap Gemini Sogeti SA 666 86,410 Sopra SA 130 43,625 450,817 ELECTRONICS - 1.6% Schneider SA 2,100 156,990 TOTAL TECHNOLOGY 607,807 UTILITIES - 5.6% TELEPHONE SERVICES - 3.6% France Telecom SA 6,300 342,552 WATER - 2.0% Generale des Eaux, Cie 1,050 195,016 TOTAL UTILITIES 537,568 TOTAL COMMON STOCKS (Cost $5,734,702) 7,612,321 NONCONVERTIBLE PREFERRED STOCKS - 0.7% TECHNOLOGY - 0.7% COMMUNICATIONS EQUIPMENT - 0.7% Sagem SA (non-vtg.) (Cost $67,320) 200 63,460 CONVERTIBLE BONDS - 3.4% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) HEALTH - 1.4% DRUGS & PHARMACEUTICALS - 1.4% Sanofi SA 4%, 1/1/00 - FRF 310,000 $ 130,742 MEDIA & LEISURE - 2.0% LODGING & GAMING - 2.0% Accor SA 6 3/4%, 1/1/00 - FRF 604,800 196,236 TOTAL CONVERTIBLE BONDS (Cost $229,929) 326,978 CASH EQUIVALENTS - 17.0% SHARES Taxable Central Cash Fund (b) 1,604,679 1,604,679 MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.50%, dated 4/30/98 due 5/1/98 $ 39,006 39,000 TOTAL CASH EQUIVALENTS (Cost $1,643,679) 1,643,679 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $7,675,630) $ 9,646,438 CURRENCY ABBREVIATIONS FRF - French franc LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $4,004,178 and $2,756,343, respectively. INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $7,678,678. Net unrealized appreciation aggregated $1,967,760, of which $2,008,699 related to appreciated investment securities and $40,939 related to depreciated investment securities. FRANCE FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $39,000) (COST $7,675,630) - SEE $ 9,646,438 ACCOMPANYING SCHEDULE CASH 577 FOREIGN CURRENCY HELD AT VALUE 11 (COST $11) RECEIVABLE FOR INVESTMENTS SOLD 113,932 RECEIVABLE FOR FUND SHARES SOLD 22,796 DIVIDENDS RECEIVABLE 42,552 INTEREST RECEIVABLE 3,566 OTHER RECEIVABLES 2,171 RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 3,944 TOTAL ASSETS 9,835,987 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 1,356,720 PAYABLE FOR FUND SHARES REDEEMED 400 OTHER PAYABLES AND 31,514 ACCRUED EXPENSES TOTAL LIABILITIES 1,388,634 NET ASSETS $ 8,447,353 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 6,398,235 DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (42,065) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 121,252 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,969,931 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 532,626 $ 8,447,353 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($8,447,353 (DIVIDED BY) 532,626 SHARES) $15.86 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $15.86) $16.35
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 5,026 DIVIDENDS INTEREST 12,844 TOTAL INCOME 17,870 EXPENSES MANAGEMENT FEE $ 21,999 TRANSFER AGENT FEES 10,342 ACCOUNTING FEES AND EXPENSES 30,018 NON-INTERESTED TRUSTEES' COMPENSATION 10 CUSTODIAN FEES AND EXPENSES 17,641 REGISTRATION FEES 7,867 AUDIT 15,601 LEGAL 16 REPORTS TO SHAREHOLDERS 2,198 MISCELLANEOUS 8 TOTAL EXPENSES BEFORE REDUCTIONS 105,700 EXPENSE REDUCTIONS (47,479) 58,221 NET INVESTMENT INCOME (LOSS) (40,351) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 132,460 FOREIGN CURRENCY TRANSACTIONS (5,049) 127,411 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 1,517,635 ASSETS AND LIABILITIES IN 8,824 1,526,459 FOREIGN CURRENCIES NET GAIN (LOSS) 1,653,870 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,613,519 OTHER INFORMATION $ 5,163 SALES CHARGES PAID TO FDC EXPENSE REDUCTIONS FMR REIMBURSEMENT $ 47,479
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ (40,351) $ 49,036 NET INVESTMENT INCOME (LOSS) NET REALIZED GAIN (LOSS) 127,411 752,856 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,526,459 20,706 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,613,519 822,598 DISTRIBUTIONS TO SHAREHOLDERS (16,501) (69,894) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (474,417) (266,472) TOTAL DISTRIBUTIONS (490,918) (336,366) SHARE TRANSACTIONS 2,646,779 5,243,968 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 487,606 334,785 COST OF SHARES REDEEMED (1,392,150) (6,049,684) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,742,235 (470,931) REDEMPTION FEES 4,142 21,293 TOTAL INCREASE (DECREASE) IN NET ASSETS 2,868,978 36,594 NET ASSETS BEGINNING OF PERIOD 5,578,375 5,541,781 END OF PERIOD (INCLUDING UNDER (OVER) DISTRIBUTION OF NET INVESTMENT INCOME OF $(42,065) AND $23,384, RESPECTIVELY) $ 8,447,353 $ 5,578,375 OTHER INFORMATION SHARES SOLD 179,323 411,477 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 39,450 28,936 REDEEMED (106,595) (472,584) NET INCREASE (DECREASE) 112,178 (32,171)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 13.27 $ 12.24 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) (.09) D .10 D .23 NET REALIZED AND UNREALIZED GAIN (LOSS) 3.86 1.66 1.98 TOTAL FROM INVESTMENT OPERATIONS 3.77 1.76 2.21 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.04) (.16) (.04) FROM NET REALIZED GAIN (1.15) (.61) - TOTAL DISTRIBUTIONS (1.19) (.77) (.04) REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .04 .07 NET ASSET VALUE, END OF PERIOD $ 15.86 $ 13.27 $ 12.24 TOTAL RETURN B, C 31.02% 15.63% 22.89% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 8,447 $ 5,578 $ 5,542 RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.00% A, E 2.00% E 2.00% E RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (1.38)% A .78% 1.74% PORTFOLIO TURNOVER RATE 96% A 150% 129% AVERAGE COMMISSION RATE F $ .1889 $ .1749 $ .1932
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). F A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
GERMANY PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY GERMANY 33.60% 43.46% 82.52% FIDELITY GERMANY 29.59% 39.16% 77.05% (INCL. 3.00% SALES CHARGE) DAX 100 28.95% 39.35% 77.61% EUROPEAN REGION FUNDS AVERAGE 26.03% 39.23% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Deutscher Aktienindex 100 (DAX 100) Index - a market capitalization weighted index of the 100 most heavily traded stocks in the German market. To measure how the fund's performance stacked up against its peers, you can compare the fund's performance to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY GERMANY 43.46% 27.26% FIDELITY GERMANY 39.16% 25.72% (INCL. 3.00% SALES CHARGE) DAX 100 39.35% 25.88% EUROPEAN REGION FUNDS AVERAGE 39.23% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Germany DAX 100 00346 EX002 1995/11/01 9700.00 10000.00 1995/11/30 9622.40 10045.93 1995/12/31 9835.80 10293.16 1996/01/31 10320.80 10746.76 1996/02/29 10369.30 10830.07 1996/03/31 10495.40 10812.65 1996/04/30 10194.70 10413.05 1996/05/31 10573.00 10679.84 1996/06/30 10650.60 10956.77 1996/07/31 10524.50 10921.61 1996/08/31 10660.30 11180.88 1996/09/30 10747.60 11282.48 1996/10/31 10999.80 11378.77 1996/11/30 11523.60 11820.89 1996/12/31 11650.51 12007.46 1997/01/31 11570.43 11917.66 1997/02/28 12000.82 12383.06 1997/03/31 12631.39 13186.91 1997/04/30 12341.13 12745.27 1997/05/31 12951.68 13390.51 1997/06/30 13352.04 13933.20 1997/07/31 14473.05 15226.21 1997/08/31 13221.92 13796.83 1997/09/30 14242.84 14883.23 1997/10/31 13251.95 13772.76 1997/11/30 13642.30 14115.89 1997/12/31 14018.54 14726.44 1998/01/31 14634.74 15145.43 1998/02/28 15349.97 16176.40 1998/03/31 16560.36 17180.21 1998/04/30 17704.73 17760.59 IMATRL PRASUN SHR__CHT 19980430 19980513 162221 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Germany Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $17,705 - a 77.05% increase on the initial investment. For comparison, look at how the Deutscher Aktienindex 100 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $17,761 - a 77.61% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) GERMANY FUND TALK: THE MANAGER'S OVERVIEW An interview with Alexandra Edzard, Portfolio Manager of Fidelity Germany Fund Q. HOW DID THE FUND PERFORM, ALEXANDRA? A. For the six-month period that ended April 30, 1998, the fund returned 33.60%, compared with 28.95% for the Deutscher Aktienindex 100 (DAX 100), the fund's benchmark. According to Lipper Analytical Services, the European region funds average returned 26.03% for the same period. For the 12-month period through April 30, 1998, the fund returned 43.46%, versus 39.35% for the DAX index and 39.23% for the European region funds average. Q. WHAT WAS THE MARKET LIKE DURING THE PERIOD? A. The market was very strong, driven by German investment in the stock market. This pro-investment sentiment reflected a sea change in German attitudes. In the past, large parts of many companies were owned by banks, and there was little pressure for companies to be managed for the benefit of shareholders. As a consequence - and because Germany's equity culture was less developed - German investors were basically savers and invested in bonds rather than equities. The stock market was viewed with suspicion. In 1996, Deutsche Telekom, Europe's largest telecommunications company and a household name in Germany, listed shares on the Frankfurt exchange. Since then, Germans have begun to embrace a new equity culture, facilitated by financial market reforms. Insurance companies have started thinking about life insurance policies wrapped around mutual fund investments. Banks are making an effort to lure depositors away from relatively low-yielding savings vehicles and into stock mutual funds. Altogether, Germans invested $8.22 billion in German equity funds in 1997. During the six-month period, small-capitalization stocks outperformed large-cap stocks, something that has not happened for many years. Many blue-chip companies were trading at historically high valuations, so investors turned to the stocks of smaller companies. Mini-caps - companies with market capitalizations of $200 million or less - were particularly strong during the period, often with two or more initial public offerings coming to market each week. Q. WHAT CONTRIBUTED TO THE FUND'S OUTPERFORMANCE RELATIVE TO THE DAX INDEX? A. The fund's overweight position in select financial companies helped boost returns. In the banking sector, consolidation trends have enabled companies to save costs and enhance returns through economies of scale. Insurance holdings also performed well. The insurance industry is likely to benefit from increased demand for private pension products, because the state-related pension schemes will not offer sufficient income to future generations. While these sector overweights helped, I do not attempt to outperform the DAX index by making sector bets. I prefer to add value through individual stock picking. During the period, the fund also benefited from several stocks outside the financial sector, including Mannesmann, BMW, Deutscher Industrie Service (DIS), SAP and Wella. In many cases, these companies performed well because they were undervalued or under-researched at the start of the period, or because they benefited from the easing of regulatory restrictions. Q. WHAT SORT OF REGULATORY CHANGES ARE TAKING PLACE IN GERMANY? A. Many of the economic reforms now taking place involve liberalizing the financial markets. For example, companies are now allowed to buy back up to 10% of their outstanding shares of stock - and many are planning to do so. This will create additional demand for stocks and help use up surplus capital. Companies now can also issue stock options to management similar to U.S. companies. Further, financial institutions are now allowed to engage in securitization, which should lead to the creation of markets for mortgage-backed and asset-backed securities. DIS, offering temporary employment services, is an example of a company that benefited from a recent change in the liberalization of employment regulations. DIS has been moving aggressively to establish a niche in such fast-growing areas as finance and information technology. Q. WHAT CHANGES WERE MADE TO THE PORTFOLIO DURING THE PERIOD? A. In the insurance sector, I increased the fund's weighting in Hannover Re and took some profits on Allianz, the fund's largest holding. Also, I reduced the fund's holdings in health care and utilities. In the utilities sector, companies are diversifying by investing their surplus cash in the telecommunications market. I limited fund holdings to those utilities I believed had made good investments. Gehe, the only health-related company in the portfolio at the start of the period, suffered from a lack of acquisition opportunities and, hence, revenue and profit growth. Further investments were made in specialty retailers Hugo Boss and Adidas. Q. WHAT WERE SOME OF THE DISAPPOINTMENTS? A. In general, banks with exposure to Asia suffered during the period. BHF Bank, which is a fascinating restructuring story, underperformed in the period and stormed ahead only recently when discovered by other market participants. Electronics giant Siemens underperformed as a result of strong competition in semiconductors. Other laggards included Viag and RWE, which were subsequently sold. Q. WHAT'S YOUR OUTLOOK? A. The German economy continues to benefit from strong export demand that is helped by a weak deutschemark relative to the U.S. dollar. Manufacturing capacity utilization is high at 84.7%, but unemployment remains above 10% as companies continue to restructure and downsize their businesses. As a result, consumer spending is still sluggish. Only car sales are improving. I intend to remain focused on companies benefiting from corporate restructuring and the regulatory changes taking place in Germany. As always, I will look for opportunities to invest in inexpensive companies with decent growth prospects and companies that are well managed and focus on improving shareholder value. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. ALEXANDRA EDZARD ON INVESTING IN GERMANY: "The outlook for the German market remains positive. Strong investment inflows should continue to drive the market on the one hand, while fundamentals support it on the other. More and more companies are realizing that they compete internationally. As a result, they are restructuring their businesses and trying to adjust their cost bases. German management teams are learning to focus on core businesses, where they can achieve strong growth and good return on capital due to strong market positions. At present, return-on-capital improvement in German companies is achieved despite very little domestic demand, but there are signs of economic recovery which, when in full swing, will give additional support to earnings growth. "The good companies can only be found by picking stocks carefully, turning them over stone by stone. With our European research team of 45 analysts, we achieve a significant breadth of company coverage and discover stocks early. Also, the extremely close teamwork among Fidelity analysts worldwide should help us pick the right stocks in an exciting market." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of German issuers FUND NUMBER: 346 TRADING SYMBOL: FGERF START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $17 million MANAGER: Alexandra Edzard, since 1996; manager, Fidelity France Fund, since May 1998; joined Fidelity in 1994 (checkmark) GERMANY INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 4.1% SWITZERLAND 6.3% ROW: 1, COL: 1, VALUE: 88.09999999999999 ROW: 1, COL: 2, VALUE: 1.5 ROW: 1, COL: 3, VALUE: 6.3 ROW: 1, COL: 4, VALUE: 4.1 OTHER 1.5% GERMANY 88.1% AS OF OCTOBER 31, 1997 UNITED STATES 9.5% ROW: 1, COL: 1, VALUE: 85.40000000000001 ROW: 1, COL: 2, VALUE: 1.0 ROW: 1, COL: 3, VALUE: 3.5 ROW: 1, COL: 4, VALUE: 9.5 SWITZERLAND 3.5% OTHER 0.6% GERMANY 86.4% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO COMMON STOCKS 81.9 74.2 PREFERRED STOCKS 14.0 16.4 SHORT-TERM INVESTMENTS 4.1 9.4 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ALLIANZ AG (REG.) 8.0 8.5 (INSURANCE) MANNESMANN AG ORD. 6.6 2.8 (INDUSTRIAL MACHINERY & EQUIPMENT) SAP AG (SYSTEME ANWENDUNGEN 5.8 3.9 PRODUKTE) (COMPUTER SERVICES & SOFTWARE) VEBA AG ORD. 5.8 3.2 (ELECTRIC UTILITY) MUNICH REINSURANCE AG (REG.) 4.7 4.1 (INSURANCE) DEUTSCHE BANK AG 4.3 4.7 (BANKS) BASF AG 4.2 1.6 (CHEMICALS & PLASTICS) DRESDNER BANK AG ORD. 4.1 3.3 (BANKS) (BMW) MUENCHEN BAYERISCHE 3.8 3.2 MOTOREWERKE AG (AUTOS, TIRES, & ACCESSORIES) BAYER AG 3.4 2.3 (CHEMICALS & PLASTICS) TOP MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 39.1 28.9 BASIC INDUSTRIES 16.1 13.4 DURABLES 15.2 16.0 INDUSTRIAL MACHINERY & EQUIPMENT 8.9 9.6 TECHNOLOGY 7.8 7.2 UTILITIES 5.8 8.3 SERVICES 1.6 1.1 TRANSPORTATION 1.0 2.2 CONSTRUCTION & REAL ESTATE 0.4 0.4 GERMANY INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 81.9% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 11.9% CHEMICALS & PLASTICS - 11.9% BASF AG 16,320 $ 739,709 Bayer AG 13,266 591,759 Beiersdorf AG 1,709 94,685 Degussa AG 2,137 119,588 Hoechst AG Ord. 13,415 542,158 2,087,899 CONSTRUCTION & REAL ESTATE - 0.4% CONSTRUCTION - 0.4% Bien-Haus AG 203 62,169 DURABLES - 7.6% AUTOS, TIRES, & ACCESSORIES - 3.1% Daimler-Benz AG Ord. 5,334 528,232 Volkswagen AG 15 12,420 540,652 TEXTILES & APPAREL - 4.5% Adidas-Salomon AG 2,851 476,251 Boss (Hugo) AG 188 314,049 790,300 TOTAL DURABLES 1,330,952 FINANCE - 38.3% BANKS - 21.6% BHF Bank AG 14,100 584,916 Bayerische Hypotheken-und Wechselbank AG 5,441 319,480 Bayerische Vereinsbank AG Ord. 4,936 386,437 Commerzbank AG 4,487 174,893 Credit Suisse Group (Reg.) 1,595 350,596 Deutsche Bank AG 9,432 747,880 Dresdner Bank AG Ord. 12,816 715,766 Julius Baer Holding AG 187 515,673 3,795,641 INSURANCE - 16.7% Allianz AG. (Reg.) 4,331 1,402,107 Allianz AG (RFD)(a) 122 37,159 CKAG Colonia Konzern AG (Bearer)(a) 534 70,173 ERGO Versicherungsgruppe AG (a) 800 151,456 Hannover Rueckversicherungs-AG 1,407 180,194 ING Groep NV 4,073 263,288 Munich Reinsurance AG (Reg.) 1,714 822,689 2,927,066 TOTAL FINANCE 6,722,707 INDUSTRIAL MACHINERY & EQUIPMENT - 8.2% ELECTRICAL EQUIPMENT - 0.9% Siemens AG 2,716 160,837 INDUSTRIAL MACHINERY & EQUIPMENT - 7.3% Linde AG 180 125,686 Mannesmann AG Ord. 1,402 1,160,071 1,285,757 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,446,594 SERVICES - 1.6% DIS Deutscher Industrie Service AG 4,200 250,237 DIS Deutscher Industrie Service AG (c) 600 35,748 285,985 SHARES VALUE (NOTE 1) TECHNOLOGY - 7.1% COMPUTER SERVICES & SOFTWARE - 5.8% SAP AG (Systeme Anwendungen Produkte) 2,126 $ 1,020,620 ELECTRONICS - 1.3% ABB AG (Bearer) 141 231,040 TOTAL TECHNOLOGY 1,251,660 TRANSPORTATION - 1.0% AIR TRANSPORTATION - 1.0% Deutsche Lufthansa AG 7,009 165,868 UTILITIES - 5.8% ELECTRIC UTILITY - 5.8% Veba AG Ord. 15,277 1,016,539 TOTAL COMMON STOCKS (Cost $10,690,769) 14,370,373 NONCONVERTIBLE PREFERRED STOCKS - 14.0% BASIC INDUSTRIES - 4.2% CHEMICALS & PLASTICS - 4.2% Henkel KGAA 5,250 418,328 Wella AG 343 317,044 735,372 DURABLES - 7.6% AUTOS, TIRES, & ACCESSORIES - 7.6% (BMW) Muenchen Bayerische Motorenwerke AG 926 665,148 Porsche AG 50 127,513 Volkswagen AG 856 537,651 1,330,312 FINANCE - 0.8% INSURANCE - 0.8% Marschollek Lautenschlaeger und Partner AG 383 149,178 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% Koenig & Bauer-Albert AG (non-vtg.) 500 119,717 TECHNOLOGY - 0.7% ELECTRONICS - 0.7% Sartorius AG 278 129,256 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $1,935,002) 2,463,835 CASH EQUIVALENTS - 4.1% Taxable Central Cash Fund (b) (Cost $718,662) 718,662 718,662 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $13,344,433) $ 17,552,870 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $35,748 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,548,043 and $9,022,357, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $8,519 for the period. INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $13,360,915. Net unrealized appreciation aggregated $4,191,955, of which $4,232,106 related to appreciated investment securities and $40,151 related to depreciated investment securities. GERMANY FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 17,552,870 (COST $13,344,433) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE (COST $179) 179 RECEIVABLE FOR INVESTMENTS SOLD 88,377 RECEIVABLE FOR FUND SHARES SOLD 13,595 DIVIDENDS RECEIVABLE 703 INTEREST RECEIVABLE 4,882 TOTAL ASSETS 17,660,606 LIABILITIES PAYABLE FOR FUND SHARES REDEEMED $ 8,963 ACCRUED MANAGEMENT FEE 8,704 OTHER PAYABLES AND 36,573 ACCRUED EXPENSES TOTAL LIABILITIES 54,240 NET ASSETS $ 17,606,366 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 12,993,646 ACCUMULATED NET INVESTMENT LOSS (99,091) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 503,423 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 4,208,388 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 1,094,054 $ 17,606,366 SHARES OUTSTANDING NET ASSET VALUE, OFFERING PRICE $16.09 AND REDEMPTION PRICE PER SHARE ($17,606,366 (DIVIDED BY) 1,094,054 SHARES) MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $16.09) $16.59
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 20,196 DIVIDENDS INTEREST 19,964 40,160 LESS FOREIGN TAXES WITHHELD (2,208) TOTAL INCOME 37,952 EXPENSES MANAGEMENT FEE $ 51,783 TRANSFER AGENT FEES 21,855 ACCOUNTING FEES AND EXPENSES 30,253 NON-INTERESTED TRUSTEES' COMPENSATION 24 CUSTODIAN FEES AND EXPENSES 28,293 REGISTRATION FEES 9,204 AUDIT 15,969 LEGAL 37 REPORTS TO SHAREHOLDERS 2,588 MISCELLANEOUS 262 TOTAL EXPENSES BEFORE REDUCTIONS 160,268 EXPENSE REDUCTIONS (23,225) 137,043 NET INVESTMENT INCOME (LOSS) (99,091) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 560,639 FOREIGN CURRENCY TRANSACTIONS (709) 559,930 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 3,590,490 ASSETS AND LIABILITIES IN (146) 3,590,344 FOREIGN CURRENCIES NET GAIN (LOSS) 4,150,274 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,051,183 OTHER INFORMATION $ 26,747 SALES CHARGES PAID TO FDC EXPENSE REDUCTIONS $ 23,174 FMR REIMBURSEMENT TRANSFER AGENT CREDITS 51 $ 23,225
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ (99,091) $ (21,289) NET INVESTMENT INCOME (LOSS) NET REALIZED GAIN (LOSS) 559,930 1,713,253 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 3,590,344 288,600 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,051,183 1,980,564 DISTRIBUTIONS TO SHAREHOLDERS - (5,297) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (1,175,759) (248,285) TOTAL DISTRIBUTIONS (1,175,759) (253,582) SHARE TRANSACTIONS 4,461,748 14,817,379 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 1,171,719 252,687 COST OF SHARES REDEEMED (3,636,235) (11,309,518) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,997,232 3,760,548 REDEMPTION FEES 1,477 66,433 TOTAL INCREASE (DECREASE) IN NET ASSETS 4,874,133 5,553,963 NET ASSETS BEGINNING OF PERIOD 12,732,233 7,178,270 END OF PERIOD (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $99,091 AND 0, RESPECTIVELY) $ 17,606,366 $ 12,732,233 OTHER INFORMATION SHARES SOLD 301,803 1,166,667 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 93,141 22,362 REDEEMED (262,395) (860,345) NET INCREASE (DECREASE) 132,549 328,684
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 13.24 $ 11.34 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) (.10) D (.02) D .01 NET REALIZED AND UNREALIZED GAIN (LOSS) 4.20 2.21 1.31 TOTAL FROM INVESTMENT OPERATIONS 4.10 2.19 1.32 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME - (.01) - FROM NET REALIZED GAIN (1.25) (.35) - TOTAL DISTRIBUTIONS (1.25) (.36) - REDEMPTION FEES ADDED TO PAID IN CAPITAL - .07 .02 NET ASSET VALUE, END OF PERIOD $ 16.09 $ 13.24 $ 11.34 TOTAL RETURN B, C 33.60% 20.47% 13.40% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 17,606 $ 12,732 $ 7,178 RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.00% A, E 2.00% E 2.00% E RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (1.45)% A (.18)% .12% PORTFOLIO TURNOVER RATE 136% A 120% 133% AVERAGE COMMISSION RATE F $ .1682 $ .1517 $ .1714 A ANNUALIZED. B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS) F A FUND IS REQUIRED TO DISCLOSE IT'S AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
HONG KONG AND CHINA PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY HONG KONG AND CHINA 0.51% -17.54% 13.05% FIDELITY HONG KONG AND CHINA -2.51% -20.01% 9.66% (INCL. 3.00% SALES CHARGE) HANG SENG -0.64% -16.93% 14.32% CHINA REGION FUNDS AVERAGE -11.89% -28.09% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Hang Seng Index - a market capitalization weighted index of the stocks of the 33 largest companies in the Hong Kong market. You can also compare the fund's performance to the China region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 20 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY HONG KONG AND CHINA -17.54% 5.04% FIDELITY HONG KONG AND CHINA -20.01% 3.76% (INCL. 3.00% SALES CHARGE) HANG SENG -16.93% 5.51% CHINA REGION FUNDS AVERAGE -28.09% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Hong Kong and China Hang Seng 00352 EX004 1995/11/01 9700.00 10000.00 1995/11/30 9729.10 10055.31 1995/12/31 9942.65 10355.18 1996/01/31 11136.94 11707.43 1996/02/29 11001.00 11493.79 1996/03/31 10787.39 11344.61 1996/04/30 10816.52 11377.80 1996/05/31 11156.36 11717.22 1996/06/30 11010.71 11485.79 1996/07/31 10738.84 11172.35 1996/08/31 11272.87 11703.04 1996/09/30 12010.80 12513.71 1996/10/31 12593.38 13153.37 1996/11/30 13962.44 14151.17 1996/12/31 14017.97 14238.54 1997/01/31 13741.76 14107.81 1997/02/28 13899.59 14226.29 1997/03/31 13021.62 13329.79 1997/04/30 13297.84 13761.33 1997/05/31 15320.13 15770.49 1997/06/30 15438.51 16275.44 1997/07/31 16888.65 17575.67 1997/08/31 15300.40 15196.09 1997/09/30 15921.89 16236.25 1997/10/31 10910.54 11505.49 1997/11/30 10999.32 11431.72 1997/12/31 10926.40 11656.10 1998/01/31 9716.76 10104.22 1998/02/28 11630.37 12566.68 1998/03/31 11858.41 12638.18 1998/04/30 10966.06 11431.68 IMATRL PRASUN SHR__CHT 19980430 19980513 151815 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Hong Kong and China Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the charts shows, by April 30, 1998, the value of the investment would have grown to $10,966 - a 9.66% increase on the initial investment. For comparison, look at how the Hang Seng Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $11,432 - a 14.32% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) HONG KONG AND CHINA FUND TALK: THE MANAGER'S OVERVIEW An interview with Joseph Tse, Portfolio Manager of Fidelity Hong Kong and China Fund Q. HOW DID THE FUND PERFORM, JOSEPH? A. For the six months that ended April 30, 1998, the fund returned 0.51%, compared to the -0.64% return of the Hang Seng Index and the China region funds average of -11.89%, as monitored by Lipper Analytical Services. For the one-year period, the fund returned - -17.54%, compared to the Hang Seng Index return of -16.93% and the China region funds average return of -28.09%. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD? A. It was a very volatile period. Even after the major market and currency problems of last October, the Asian markets continued to suffer in late 1997 and into January 1998. In late January, in what I believe was a reaction against extreme losses in the market, the Asian markets and currencies did rally for a period. Some Asian markets went up as much as 25% in local market value in just a few days, and some about 50% when taking currency appreciation into account. This benefited the Hong Kong market, where the Hang Seng Index went from a low of 8,000 in January to 12,000 by the end of March before slipping again. Over the full period, the Hong Kong market did significantly better than other Asian markets, in part because it is more mature and less volatile. Q. WHAT WERE YOUR PRINCIPAL INVESTMENT STRATEGIES? A. I tried to reposition the fund according to changing market conditions, taking advantage of a rally in the January-March period to move into less volatile industries. I started out the period with a greater emphasis on property companies than most other institutional investors. I had less emphasis on defensive industries such as utilities and far less cash than other investors had. That changed as the market rebounded from January to March, when I took advantage of strength in the property companies to reduce my position in that volatile sector. I also reduced the number of holdings in interest-rate-sensitive industries such as banking. I built up investments in the more defensive industries, including utilities, telecommunications, globally competitive exporters and companies benefiting from infrastructure spending in China. I believe the decision to move away from property-related companies while the market was rallying helped my performance, relative to other China-related funds. Q. WHAT AREAS OF THE MARKET PERFORMED THE BEST DURING THE SIX MONTHS? A. Just a few very large companies had very strong performance relative to the market. These included the fund's four largest investments: HSBC Holdings, the major banking company that makes up more than 25% of the Hang Seng Index; China Telecom, which provides cellular phone service in China; Hutchison, the conglomerate involved in properties, telecommunications, ports and retailing; and Cheung Kong Holdings, a property company. Another major holding that did well was Hong Kong Telecom. Q. APART FROM THESE BIG COMPANIES, DID ANY OTHER INVESTMENTS HELP THE FUND'S PERFORMANCE? A. Several helped the fund, including Johnson Electric Holdings, the fund's largest investment outside the Hang Seng Index. This company sells small motors throughout the world, especially in developed nations. It is one of the very few globally competitive manufacturers based in Hong Kong. Two other successful investments were so-called "red chip" companies - firms based in Hong Kong but actually controlled from China. As a general rule, I prefer not to invest in "red chip" companies because I believe they have poorer management, with less experience than Hong Kong-controlled companies in either competing or making financial disclosures. However, I am open to opportunities. The "red chip" companies that helped the fund were Legend Holdings, which assembles and markets computers in China; and Tianjin Development, a conglomerate that owns several businesses, including a red wine distribution business and an Otis Elevator franchise in Tianjin Province. Q. WERE THERE ANY DISAPPOINTMENTS, APART FROM THE CONTINUED VOLATILITY? A. Yes. The leading disappointment was a company I had over-weighted versus the Hang Seng Index, Hong Kong and China Gas Co. This company - which has a near monopoly in gas distribution in Hong Kong - traditionally has been able to increase its earnings by well over 15% a year. However, economic problems led to lower gas consumption in Hong Kong, particularly among large users such as restaurants and hotels. Moreover, the stock price was hurt by rumors that the company might face new competition. Another disappointing performer was Glorious Sun Enterprises, a retail clothing company operating in Mainland China. This well-managed company was one of the few companies in which I could invest that has demonstrated an ability to make a profit in China. However, consumer buying has fallen off dramatically in China. Q. WHAT HAS BEEN THE EFFECT OF THE DECISION NOT TO DEVALUE THE CURRENCY IN HONG KONG? A. Hong Kong, backed by China, has told the world it will not devalue the Hong Kong dollar. I believe exports from Hong Kong will decline because they will be less competitive against products produced in countries with weaker currencies. Unemployment could go higher. Longer term, deflation - or price decreases - could probably lead to a strengthening of export industries as the relative price of Chinese-produced goods becomes more competitive, but it would have been easier to adjust the currency. However, I believe China will not devalue the Hong Kong currency. This is being decided as a political issue rather than an economic issue. In China, politics comes before economics. Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS TO A YEAR? A. I am pessimistic about the immediate future. The current economic downturn in Hong Kong is the most serious in 10 years. I believe it will be a U-shaped correction, with a sharp descent and a sharp ascent and a long period - perhaps two years - at the bottom. In addition, Hong Kong remains an asset-price-driven market, with almost 75% of corporate profits generated either directly or indirectly from real estate. I don't see real estate prices going up in the next six to 12 months. For the foreseeable future, I will continue to add investments in companies that can deliver earnings growth. I will be considering investing some of the portfolio outside of Hong Kong and China, searching for companies that can benefit from developments in Hong Kong and China. These may be companies based in Singapore or Taiwan that are able to generate earnings growth, perhaps by taking advantage of lower labor costs in China. I am trying to find pockets of opportunity, using more creative ideas, because I think there are companies that can produce good relative performance for the fund. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. JOSEPH TSE ON THE LONG-TERM OUTLOOK IN HONG KONG AND CHINA: "The opportunities in Hong Kong and China will depend, to a large extent, on how much the markets can move away from their historically heavy emphasis on property companies. When Britain ruled Hong Kong, there was a high land-price policy for real estate: The government controlled the supply of land, so prices continued to go up. However, the new Hong Kong Special Administrative Region - controlled by China - has a different agenda, which is to keep an adequate supply of housing with stable prices. This is better for the people, but not for property companies. As a result, the earnings power of most key property companies in Hong Kong has been weakened. "Longer term, investment opportunities will have to depend on China and whether Hong Kong can continue to benefit from servicing China. The Chinese economy is growing rapidly, at a compounded rate of more than 8% a year. Unfortunately, publicly listed Chinese-based companies generally are not worthwhile investments because they generally are not well managed. Investments in them can be extremely volatile, and I don't see prospects of much long-term capital growth. I had minimal investments in them at the close of the period. "Nevertheless, looking more closely at China, there are sectors that will continue to grow. Telecommunications investment continues, despite a recession. The market penetration of technologies such as computers still is low in China. Even if penetration increases a little, the growth will be unmatched by any other economy in the world. Moreover, the government will continue to invest in infrastructure development and some companies will benefit." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Hong Kong and Chinese issuers FUND NUMBER: 352 TRADING SYMBOL: FHKCX START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $173 million MANAGER: Joseph Tse, since inception; director of research, Fidelity Investments Management (Hong Kong), since 1994; manager Asian portion of various global equity funds, since 1993; analyst covering Hong Kong and Chinese equities, 1990-1993; joined Fidelity in 1990 (checkmark) HONG KONG AND CHINA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 CHINA (PEOPLES REPUBLIC) 4.1% UNITED KINGDOM 23.6% ROW: 1, COL: 1, VALUE: 23.6 ROW: 1, COL: 2, VALUE: 6.0 ROW: 1, COL: 3, VALUE: 66.3 ROW: 1, COL: 4, VALUE: 4.1 HONG KONG 66.3% OTHER 6.0% AS OF OCTOBER 31, 1997 UNITED STATES 8.6% ROW: 1, COL: 1, VALUE: 8.6 ROW: 1, COL: 2, VALUE: 18.4 ROW: 1, COL: 3, VALUE: 1.0 ROW: 1, COL: 4, VALUE: 72.0 HONG KONG 72.0% UNITED KINGDOM 18.4% OTHER 1.0% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 96.2 91.4 SHORT-TERM INVESTMENTS 3.8 8.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO HSBC HOLDINGS PLC 23.6 18.4 (BANKS) CHINA TELECOM (HONG KONG) LTD. 8.1 3.4 (CELLULAR) HUTCHISON WHAMPOA LTD. ORD. 7.7 10.3 (ELECTRICAL EQUIPMENT) CHEUNG KONG HOLDINGS LTD. 5.3 8.7 (REAL ESTATE) CLP HOLDINGS LTD. 4.6 2.2 (ELECTRIC UTILITY) HONG KONG & CHINA GAS CO. LTD. 4.4 2.1 (GAS) SUN HUNG KAI PROPERTIES LTD. 4.3 7.9 (REAL ESTATE) HONG KONG TELECOMMUNICATIONS LTD. 4.0 3.2 (TELEPHONE SERVICES) HANG SENG BANK LTD. 3.2 1.7 (BANKS) JOHNSON ELECTRIC HOLDINGS LTD. 2.4 1.2 (ELECTRICAL EQUIPMENT) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 31.2 27.0 UTILITIES 23.1 14.4 CONSTRUCTION & REAL ESTATE 18.1 25.5 INDUSTRIAL MACHINERY & EQUIPMENT 11.6 12.1 TECHNOLOGY 3.2 1.0 TRANSPORTATION 3.2 1.5 HOLDING COMPANIES 1.8 3.6 DURABLES 1.4 1.6 MEDIA & LEASURE 1.0 1.2 HEALTH 0.9 1.6 HONG KONG AND CHINA INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 96.2% SHARES VALUE (NOTE 1) CONSTRUCTION & REAL ESTATE - 18.1% BUILDING MATERIALS - 0.4% Anhui Conch Cement Co. Ltd. Class H 3,504,000 $ 719,024 CONSTRUCTION - 1.9% Cheung Kong Infrastructure Holdings Ltd. 1,284,000 3,256,192 Pacific Ports Co. Ltd. 612,000 156,386 3,412,578 REAL ESTATE - 15.8% Cheung Kong Holdings Ltd. 1,397,000 9,285,087 Guangzhou Investment Co. Ltd. 13,314,000 2,405,575 HKR International Ltd. 1,712,400 1,027,639 Henderson Investment Ltd. 654,000 422,017 Henderson Land Development Co. Ltd. 772,000 3,447,274 New World Development Co. Ltd. 1,213,188 3,452,384 Sun Hung Kai Properties Ltd. 1,273,000 7,557,334 27,597,310 TOTAL CONSTRUCTION & REAL ESTATE 31,728,912 DURABLES - 1.4% TEXTILES & APPAREL - 1.4% Glorious Sun Enterprises 9,900,000 2,414,790 ENERGY - 0.5% OIL & GAS - 0.5% Zhenhai Refining & Chemical Co., Class H 2,984,000 818,352 FINANCE - 31.2% BANKS - 29.4% HSBC Holdings PLC 1,406,676 41,364,827 Hang Seng Bank Ltd. 658,000 5,541,008 Liu Chong Hing Bank Ltd. 2,609,000 3,653,307 Wing Lung Bank 208,000 783,842 51,342,984 CREDIT & OTHER FINANCE - 0.2% JCG Holdings Ltd. 940,000 430,664 INSURANCE - 1.6% National Mutual Asia Ltd. 3,562,000 2,850,152 TOTAL FINANCE 54,623,800 HEALTH - 0.9% MEDICAL EQUIPMENT & SUPPLIES - 0.9% Sa Sa International Holdings Ltd. 8,842,000 1,654,630 HOLDING COMPANIES - 1.8% Citic Pacific Ltd. Ord. 442,000 1,357,630 Ocean-Land Group Ltd. 298,000 93,263 Tianjin Development Holdings Ltd. 1,464,000 1,672,117 3,123,010 INDUSTRIAL MACHINERY & EQUIPMENT - 11.6% ELECTRICAL EQUIPMENT - 10.2% Harbin Power Equipment Co. Ltd. Class H 786,000 107,525 Hutchison Whampoa Ltd. Ord. 2,188,000 13,525,870 Johnson Electric Holdings Ltd. 1,249,040 4,231,438 17,864,833 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 1.4% Dongfang Electrical Machinery Co. Ltd. Class H 126,000 $ 17,887 First Tractor Co. Ltd. Class H 882,000 492,308 Mabuchi Motor Co. 34,500 1,989,610 2,499,805 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 20,364,638 MEDIA & LEISURE - 1.0% BROADCASTING - 0.7% Television Broadcast Ltd. Ord. 522,000 1,333,884 PUBLISHING - 0.3% South China Morning Post Holdings 790,000 474,092 TOTAL MEDIA & LEISURE 1,807,976 NONDURABLES - 0.1% FOODS - 0.1% Tingyi (Cayman Islands) Holding Corp. 1,422,000 139,475 RETAIL & WHOLESALE - 0.1% TRADING COMPANIES - 0.1% Li & Fung Ltd. 98,000 164,419 TECHNOLOGY - 3.2% COMMUNICATIONS EQUIPMENT - 1.1% Datacraft Asia Ltd. 567,000 1,905,120 COMPUTERS & OFFICE EQUIPMENT - 0.8% Legend Holdings Ltd. (a) 3,066,000 1,315,668 ELECTRONICS - 1.3% Elec & Eltek International Holdings Ltd. 1,340,000 380,461 Vtech Holdings Ltd. 556,000 1,951,758 2,332,219 TOTAL TECHNOLOGY 5,553,007 TRANSPORTATION - 3.2% AIR TRANSPORTATION - 0.4% Swire Pacific Ltd. Class A 118,000 589,353 TRUCKING & FREIGHT - 2.8% Jiangsu Expressway Co. Ltd. Class H 1,836,000 527,212 Shenzhen Expressway Co. Ltd. Class H 4,304,000 1,180,357 Sichuan Expressway Co. Ltd. Class H 6,254,000 1,073,475 Zhejiang Expressway Co. Class H 8,908,000 2,149,830 4,930,874 TOTAL TRANSPORTATION 5,520,227 UTILITIES - 23.1% CELLULAR - 8.1% China Telecom (Hong Kong) Ltd. 7,320,000 14,136,749 ELECTRIC UTILITY - 6.6% CLP Holdings Ltd. 1,680,000 8,065,563 Hong Kong Electric Holdings Ord. 1,087,000 3,338,788 Shandong Huaneng Power Development Ltd. Class N sponsored ADR 9,100 65,975 11,470,326 GAS - 4.4% Hong Kong & China Gas Co. Ltd. 5,700,000 7,760,857 Hong Kong & China Gas Co. Ltd. warrants 9/30/99 (a) 250,000 - 7,760,857 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UTILITIES - CONTINUED TELEPHONE SERVICES - 4.0% Hong Kong Telecommunications Ltd. 3,665,332 $ 7,078,672 TOTAL UTILITIES 40,446,604 TOTAL COMMON STOCKS (Cost $173,046,236) 168,359,840 CASH EQUIVALENTS - 3.8% Taxable Central Cash Fund (b) (Cost $6,596,925) 6,596,925 6,596,925 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $179,643,161) $ 174,956,765 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $79,560,754 and $72,449,618, respectively. INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $180,167,437. Net unrealized depreciation aggregated $5,210,672, of which $20,798,461 related to appreciated investment securities and $26,009,133 related to depreciated investment securities. HONG KONG AND CHINA FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 174,956,765 (COST $179,643,161) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 399,253 (COST $399,253) RECEIVABLE FOR INVESTMENTS SOLD 337,092 RECEIVABLE FOR FUND SHARES SOLD 482,576 DIVIDENDS RECEIVABLE 1,280,216 INTEREST RECEIVABLE 40,282 REDEMPTION FEES RECEIVABLE 303 TOTAL ASSETS 177,496,487 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 2,739,197 PAYABLE FOR FUND SHARES REDEEMED 775,020 ACCRUED MANAGEMENT FEE 115,660 OTHER PAYABLES AND 136,509 ACCRUED EXPENSES TOTAL LIABILITIES 3,766,386 NET ASSETS $ 173,730,101 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 209,861,102 UNDISTRIBUTED NET INVESTMENT INCOME 1,417,573 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (32,861,409) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (4,687,165) AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 15,715,002 $ 173,730,101 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($173,730,101 (DIVIDED BY) 15,715,002 SHARES) $11.06 MAXIMUM OFFERING PRICE PER $11.40 SHARE (100/97.00 OF $11.06)
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 3,471,200 DIVIDENDS INTEREST 273,049 3,744,249 LESS FOREIGN TAXES WITHHELD (129,382) TOTAL INCOME 3,614,867 EXPENSES MANAGEMENT FEE $ 665,618 TRANSFER AGENT FEES 344,721 ACCOUNTING FEES AND EXPENSES 68,242 NON-INTERESTED TRUSTEES' COMPENSATION 330 CUSTODIAN FEES AND EXPENSES 81,769 REGISTRATION FEES 32,444 AUDIT 16,645 LEGAL 568 REPORTS TO SHAREHOLDERS 17,998 MISCELLANEOUS 216 TOTAL EXPENSES BEFORE REDUCTIONS 1,228,551 EXPENSE REDUCTIONS (233) 1,228,318 NET INVESTMENT INCOME 2,386,549 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (31,478,500) FOREIGN CURRENCY TRANSACTIONS (69) (31,478,569) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 29,382,993 ASSETS AND LIABILITIES IN (877) 29,382,116 FOREIGN CURRENCIES NET GAIN (LOSS) (2,096,453) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 290,096 OTHER INFORMATION $ 306,615 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 183 EXPENSE REDUCTIONS $ 33 CUSTODIAN CREDITS TRANSFER AGENT CREDITS 200 $ 233
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 2,386,549 $ 2,557,197 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) (31,478,569) 3,355,483 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 29,382,116 (45,265,803) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 290,096 (39,353,123) DISTRIBUTIONS TO SHAREHOLDERS (968,977) (1,741,904) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN - (995,341) TOTAL DISTRIBUTIONS (968,977) (2,737,245) SHARE TRANSACTIONS 71,046,986 371,658,055 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 960,768 2,718,651 COST OF SHARES REDEEMED (75,404,903) (266,116,227) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (3,397,149) 108,260,479 REDEMPTION FEES 390,120 1,365,678 TOTAL INCREASE (DECREASE) IN NET ASSETS (3,685,910) 67,535,789 NET ASSETS BEGINNING OF PERIOD 177,416,011 109,880,222 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $1,417,573 AND $2,038,914, RESPECTIVELY) $ 173,730,101 $ 177,416,011 OTHER INFORMATION SHARES SOLD 6,497,245 26,276,084 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 81,433 197,576 REDEEMED (6,904,108) (18,903,843) NET INCREASE (DECREASE) (325,430) 7,569,817
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 12.97 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME C .14 .17 .29 NET REALIZED AND UNREALIZED GAIN (LOSS) (.10) (1.95) 2.64 TOTAL FROM INVESTMENT OPERATIONS .04 (1.78) 2.93 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.06) (.14) (.01) FROM NET REALIZED GAIN - (.08) - TOTAL DISTRIBUTIONS (.06) (.22) (.01) REDEMPTION FEES ADDED TO PAID IN CAPITAL .02 .09 .05 NET ASSET VALUE, END OF PERIOD $ 11.06 $ 11.06 $ 12.97 TOTAL RETURN B 0.51% (13.36)% 29.83% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 173,730 $ 177,416 $ 109,880 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.39% A 1.31% 1.62% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.71% A 1.18% 2.53% PORTFOLIO TURNOVER RATE 87% A 174% 118% AVERAGE COMMISSION RATE D $ .0023 $ .0034 $ .0049
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
JAPAN PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY JAPAN -5.87% -6.63% -17.33% 11.11% FIDELITY JAPAN -8.69% -9.43% -19.81% 7.77% (INCL. 3.00% SALES CHARGE) TOPIX -12.44% -17.80% -33.93% -12.99% JAPANESE FUNDS AVERAGE -7.32% -10.98% -24.82% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on September 15, 1992. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Tokyo Stock Exchange Index (TOPIX) - a market capitalization weighted index of over 1,100 stocks traded in the Japanese market. To measure how the fund's performance stacked up against its peers, you can compare it to the Japanese funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 34 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY JAPAN -6.63% -3.74% 1.89% FIDELITY JAPAN -9.43% -4.32% 1.34% (INCL. 3.00% SALES CHARGE) TOPIX -17.80% -7.96% -2.44% JAPANESE FUNDS AVERAGE -10.98% -5.98% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Japan Fund TOPIX 00350 TK001 1992/09/15 9700.00 10000.00 1992/09/30 9641.80 9815.42 1992/10/31 9544.80 9336.12 1992/11/30 9641.80 9576.86 1992/12/31 9661.20 9437.20 1993/01/31 9748.50 9388.21 1993/02/28 10301.40 9815.57 1993/03/31 11484.80 11253.41 1993/04/30 13036.80 13170.39 1993/05/31 13405.40 13966.69 1993/06/30 12610.00 13389.70 1993/07/31 13453.90 14330.57 1993/08/31 13686.70 14650.81 1993/09/30 13318.10 13889.46 1993/10/31 12949.50 13636.41 1993/11/30 11252.00 11429.98 1993/12/31 11637.09 11715.04 1994/01/31 13010.29 13586.06 1994/02/28 13621.71 14249.19 1994/03/31 13391.17 13845.83 1994/04/30 13701.90 14386.73 1994/05/31 14082.78 14648.69 1994/06/30 14934.77 15465.45 1994/07/31 14443.62 14910.88 1994/08/31 14393.51 14947.34 1994/09/30 14042.69 14552.59 1994/10/31 14303.30 14937.45 1994/11/30 13331.03 14052.07 1994/12/31 13552.55 14299.84 1995/01/31 12387.96 13546.80 1995/02/28 11810.82 12780.10 1995/03/31 12758.98 13884.10 1995/04/30 12913.57 14548.67 1995/05/31 12181.84 13609.31 1995/06/30 12016.94 12960.37 1995/07/31 12820.82 13960.65 1995/08/31 12769.29 13417.71 1995/09/30 12738.37 13428.96 1995/10/31 12449.80 12721.44 1995/11/30 12594.08 13464.74 1995/12/31 13263.98 14067.55 1996/01/31 13171.23 13932.57 1996/02/29 12810.51 13709.11 1996/03/31 13171.23 14169.24 1996/04/30 14016.33 15121.58 1996/05/31 13511.33 14389.30 1996/06/30 13748.37 14458.38 1996/07/31 13068.16 13756.75 1996/08/31 12573.47 13177.79 1996/09/30 12862.04 13557.37 1996/10/31 12037.55 12655.38 1996/11/30 12336.43 12756.39 1996/12/31 11779.52 11779.59 1997/01/31 10892.44 10516.37 1997/02/28 11181.26 10724.66 1997/03/31 10995.59 10331.19 1997/04/30 11542.28 10584.92 1997/05/31 12872.89 11901.06 1997/06/30 13574.29 12672.60 1997/07/31 13935.31 12178.72 1997/08/31 12295.26 11093.36 1997/09/30 12439.66 10753.27 1997/10/31 11449.44 9937.19 1997/11/30 11036.85 9188.53 1997/12/31 10515.02 8470.67 1998/01/31 11186.63 9376.43 1998/02/28 11008.24 9454.41 1998/03/31 10305.14 8817.25 1998/04/30 10777.37 8701.22 IMATRL PRASUN SHR__CHT 19980430 19980506 114739 R00000000000071 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Japan Fund on September 15, 1992, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $10,777 - a 7.77% increase on the initial investment. For comparison, look at how the Tokyo Stock Exchange Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have been $8,701 - a 12.99% decrease. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) JAPAN FUND TALK: THE MANAGER'S OVERVIEW An interview with Shigeki Makino, Portfolio Manager of Fidelity Japan Fund Q. HOW DID THE FUND PERFORM, SHIGEKI? A. For the six months that ended April 30, 1998, the fund had a total return of -5.87%. During the same period, the Tokyo Stock Exchange Index (TOPIX) had a return of -12.44%, while the Japanese funds average tracked by Lipper Analytical Services returned -7.32%. For the 12 months that ended April 30, 1998, the fund had a total return of - -6.63%. Over that same period, TOPIX and the Lipper Japanese funds average had returns of -17.80% and -10.98%, respectively. Q. THE FUND HAD A NEGATIVE RETURN, BUT IT PERFORMED BETTER THAN THE INDEX AND THE AVERAGE. CAN YOU EXPLAIN WHY? A. Negative returns - denominated in U.S. dollars - were the norm for most funds investing in Japan over the period. The Japanese yen depreciated further against the dollar and thereby lessened the value of Japanese stocks in U.S. dollar terms. Thus, although many of the fund's stocks gained in value as measured in yen, these gains were largely offset by the yen's decline in value against the dollar. Unlike many of its competitors, the fund does not use hedging procedures to offset the effects of currency fluctuations. However, the relatively strong performance of many of the fund's holdings helped it outperform both the index and the average. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE IN JAPAN DURING THE PAST SIX MONTHS? A. The markets went from one extreme to another. Following last October's plunge in the Hong Kong and U.S. equity markets, November and December 1997 saw sharply falling stock prices all over the Pacific Basin and rapidly depreciating currencies relative to the U.S. dollar. In Japan, the failure of Yamaichi Securities and several other prominent financial services firms raised the possibility in investors' minds of widespread bankruptcies. The share prices of many Japanese companies fell as they began to reflect that possibility. Early in 1998, the markets entered a radically different phase. The Japanese government, fearing a "domino effect" of failing companies against the backdrop of an already stagnant economy, steadied the markets with promises to pass legislation to help stimulate the economy, and with assurances that banks would not be allowed to fail. From mid-January through mid-March, the Japanese stock market rallied strongly, regaining much of the ground it had lost near the end of 1997. However, the government failed to follow through on its promises with any meaningful reform measures. The markets responded by plunging again in April, reflecting investors' loss of confidence. Q. WHAT STRATEGY DID YOU USE IN THIS DIFFICULT ENVIRONMENT? A. Investing in Japan during the period presented a number of challenges. For one thing, the economy was extremely sluggish and showed few signs of recovering any time soon, so it was important to be selective about investments there. In addition, many questions remained about how vigorously the government intended to pursue the deregulation of various industries - especially financial services. In this environment, I looked for companies with strong business franchises, shareholder-friendly managements, healthy cash flows and high returns on capital. Many of the companies that fit this description derived much of their revenue from exports. These companies can still do well when the yen declines relative to the U.S. dollar, as it did over the period. Depreciation of the yen has the effect of increasing yen-denominated sales even when U.S. dollar-denominated sales remain flat. Q. THE FUND HAD A FUTURES POSITION THAT COMPRISED ROUGHLY 2% OF ITS PORTFOLIO AT THE END OF THE PERIOD. CAN YOU ELABORATE ON THAT? A. The fund had a sudden inflow of cash early in 1998, reflecting renewed investor interest in Japan following the Japanese government's reassuring announcements. Instead of investing all of the cash in equities right away, I preferred to employ it gradually, as attractive opportunities presented themselves. In the meantime, I bought some Nikkei Index futures contracts, which trade on the Chicago Mercantile Exchange. This position provided a way for the fund to participate more fully in the strength that the Japanese stock market was displaying at that time. In March, I began to liquidate the position. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A. TDK performed well, and I used a dip in the stock's price to increase the fund's position in this stock. The company makes video and audio tapes, as well as a variety of electronic components. Investors responded positively to the earnings potential of TDK's line of magneto resistant (MR) heads for computer hard disk drives, which disk drive manufacturers now use instead of the old thermal heads. Aiwa also helped the fund's performance. The company, which is extremely competitive in the mini-component stereo market, benefited from having production facilities in Malaysia and Indonesia - two countries whose currencies depreciated sharply in the past year against both the Japanese yen and the U.S. dollar. When the Malaysian ringgit and the Indonesian rupiah declined against the yen, Aiwa experienced lower costs for Malaysian and Indonesian labor and other expenses. On the other hand, much of the company's revenue came from the U.S. and Europe. Therefore, the currency markets handed Aiwa a double-barreled advantage. The company's revenue stream benefited not only from the company's increased market share but also from the yen's lower value in U.S. dollar terms, while its costs fell substantially because of the decline of the ringgit and rupiah against the yen. And because Aiwa shares had been selling at a very reasonable valuation, the stock's price rose sharply as the implications of this scenario became clear to investors. Q. WHAT STOCKS HURT THE FUND'S PERFORMANCE? A. The banking sector in general was weak due to widespread problems with non-performing loans, further erosion in the prices of banks' equity holdings, Asian exposure and increased competition. And, although I underweighted this sector relative to the TOPIX, there were some banking stocks, such as Sakura Bank and Fuji Bank, that hurt the fund's performance. Another disappointing stock was THK Corp. This stock suffered from a downturn in the semiconductor industry and generally poor performance in the Japanese over-the-counter stock market. However, the company hired a new president who made improved profitability and shareholder returns a high priority. Moreover, the fund acquired the stock at what I felt was a very reasonable price, and it is still one of the fund's holdings. Q. WHAT'S YOUR OUTLOOK, SHIGEKI? A. Japan is still mired in a bad recession. Production, private consumption, capital spending and other economic indicators are all very weak. Moreover, the Japanese government appears to be backpedaling on some aspects of deregulation - to the detriment of the overall economy. However, there are some positive signs. Increasingly, Japanese companies are adopting more rational ways of allocating their capital. For example, many companies have announced stock buybacks, a tactic that helps existing shareholders by increasing earnings per share. I am also seeing more firms divesting themselves of unprofitable lines of business. When making investment decisions for the fund, I look at these and many other indicators to determine management's commitment to "doing the right thing" for shareholders. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. SHIGEKI MAKINO ON THE CURRENT STATE OF DEREGULATION IN THE JAPANESE ECONOMY: "A cloud of uncertainty currently hangs over the Japanese government's deregulation plans. At issue is whether the government has the resolve to proceed with deregulation even if it means inflicting some short-term pain. In the fall of 1997 that resolve seemed to be present, as Yamaichi Securities, Hokkaido Takushoku Bank and other ailing companies were allowed to fail. Although difficult for investors, customers and employees in the short run, these failures had the beneficial effect of helping to cleanse the economy of companies that were unable to compete, making it stronger in the long run. "However, with the failure of a number of prominent firms, the Japanese stock market plunging and the economy mired in recession, the government appeared to lose its resolve. Early in 1998 the government announced a series of measures designed to shore up the markets and reassure investors. However, the market's judgment of these measures has been basically, `Too little, too late.' For example, the government has said that it will pass legislation designed to stimulate the economy, but fiscal policy to date - which has included a damaging sales tax hike - has been ineffective, if not downright counterproductive. Other measures fail to address the economy's underlying structural problems. For instance, firms with securities portfolios can now - for accounting purposes - value those securities at cost or market value, whichever is higher. Similarly, real estate can now be `marked to market' instead of valued at cost - an advantage for firms that acquired real estate at a cost below its current value. These measures are essentially accounting tricks that cover up the real problems and postpone the need to confront them. "The Japanese economy - and especially the financial services sector - is still riddled with many companies that can be competitive only with infusions of cash and other help from the government. The convoy system - a method of transferring resources from healthy companies to struggling ones - is another mechanism for bailing out weak firms. The trouble with these transfers is that they subsidize bad business decisions and allow companies to continue their unprofitable ways without penalty. At the same time, there is a tremendous opportunity cost because resources are siphoned away from more profitable endeavors. "Until Japanese companies, as a group, become much more competitive and responsive to shareholders' concerns, they will be unable to provide the return on capital demanded by global investors. These firms need to avail themselves of the techniques employed so effectively by companies that serve as models of competition around the globe. Examples of these techniques include cutting costs, shrinking debt, buying back stock, raising dividends and using mergers and acquisitions to bolster core competencies. Ultimately, I expect that the current uncertainty will pass, and Japan will wholeheartedly embrace deregulation and competition as the most viable options for its economy." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Japanese issuers FUND NUMBER: 350 TRADING SYMBOL: FJPNX START DATE: September 15, 1992 SIZE: as of April 30, 1998, more than $249 million MANAGER: Shigeki Makino, since 1994; manager, Fidelity Pacific Basin Fund, since 1996; joined Fidelity in 1990 (checkmark) JAPAN INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 10.2% ROW: 1, COL: 1, VALUE: 10.2 ROW: 1, COL: 2, VALUE: 89.8 JAPAN 89.8% AS OF OCTOBER 31, 1997 UNITED STATES 5.2% OTHER 0.1% ROW: 1, COL: 1, VALUE: 5.2 ROW: 1, COL: 2, VALUE: 1.1 ROW: 1, COL: 3, VALUE: 93.7 JAPAN 94.7% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS & EQUITY FUTURES 89.8 94.8 BONDS 1.6 0.0 SHORT-TERM INVESTMENTS 8.6 5.2 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO TOYOTA MOTOR CORP. 2.9 2.9 (AUTOS, TIRES, & ACCESSORIES) HONDA MOTOR CO. LTD. 2.8 2.5 (AUTOS, TIRES, & ACCESSORIES) CANON, INC. 2.7 2.5 (COMPUTERS & OFFICE EQUIPMENT) ROHM CO. LTD. 2.3 2.3 (ELECTRONICS) MINEBEA CO. LTD. 2.2 2.1 (ELECTRONICS) TDK CORP. 2.2 1.5 (ELECTRONICS) AIWA CO. LTD. 2.0 0.4 (ELECTRONICS) MATSUSHITA ELECTRIC INDUSTRIAL CO. LTD. 1.9 3.3 (CONSUMER ELECTRONICS) HOYA CORP. 1.9 1.5 (MEDICAL EQUIPMENT & SUPPLIES) TAKEDA CHEMICAL INDUSTRIES LTD. 1.9 2.2 (DRUGS & PHARMACEUTICALS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 26.6 25.3 DURABLES 14.4 13.9 FINANCE 12.3 15.8 INDUSTRIAL MACHINERY & EQUIPMENT 9.8 10.3 HEALTH 7.5 9.1 SERVICES 4.9 4.5 BASIC INDUSTRIES 4.5 2.9 MEDIA & LEISURE 3.8 4.9 RETAIL & WHOLESALE 2.4 2.4 CONSTRUCTION & REAL ESTATE 1.3 1.3 JAPAN INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 87.8% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 4.5% CHEMICALS & PLASTICS - 3.5% Asahi Chemical Industry Co. Ltd. 250,000 $ 873,330 Canon Chemicals, Inc. 50,000 557,124 Sekisui Chemical Co. Ltd. 250,000 1,368,342 Shin-Etsu Chemical Co. Ltd. 160,000 3,107,849 Sumitomo Bakelite Co. Ltd. 299,000 2,066,493 Tenma Corp. 70,000 811,594 8,784,732 IRON & STEEL - 1.0% Sumitomo Special Metals Co. 40,000 894,410 Sumitomo Metal Industries Ltd. 900,000 1,483,907 2,378,317 TOTAL BASIC INDUSTRIES 11,163,049 CONSTRUCTION & REAL ESTATE - 1.3% CONSTRUCTION - 1.3% Daiwa House Industry Co. Ltd. 200,000 1,611,142 Okumura Gumi 190,000 700,922 Sumitomo Forestry Co. Ltd. 150,000 848,108 3,160,172 DURABLES - 14.4% AUTOS, TIRES, & ACCESSORIES - 8.2% Bridgestone Corp. 176,000 4,001,656 Denso Corp. 130,000 2,226,614 Honda Motor Co. Ltd. 190,000 6,866,177 Toyota Motor Corp. 280,000 7,272,727 20,367,174 CONSUMER DURABLES - 1.6% Aderans Co. Ltd. 90,000 2,120,836 Heiwa Corp. 90,000 945,229 Sankyo Co. Ltd. (Gunma) 55,000 877,847 3,943,912 CONSUMER ELECTRONICS - 4.6% Citizen Watch Co. Ltd. Ord. 250,000 1,675,136 Matsushita Electric Industrial Co. Ltd. 300,000 4,788,255 Sharp Corp. 150,000 1,174,478 Sony Corp. 44,700 3,797,421 11,435,290 TOTAL DURABLES 35,746,376 ENERGY - 0.7% OIL & GAS - 0.7% Nippon Oil Co. Ltd. 500,000 1,682,665 FINANCE - 10.8% BANKS - 2.9% Akita Bank Ltd. 300,000 1,312,253 Bank of Tokyo-Mitsubishi Ltd. 225,000 2,776,397 Fuji Bank Ltd. 230,000 1,290,043 Sakura Bank Ltd. 500,000 1,712,780 7,091,473 CREDIT & OTHER FINANCE - 6.6% Acom Co. Ltd. 75,000 3,946,923 Aiful Corp. (c) 9,000 593,563 Credit Saison Co. Ltd. 80,000 1,728,590 Nichiei Co. Ltd. 38,500 2,985,507 Shohkoh Fund & Co. Ltd. 8,000 2,535,667 Takefuji Corp. 60,000 3,139,469 Takefuji Corp. (c) 30,000 1,569,735 16,499,454 SHARES VALUE (NOTE 1) SECURITIES INDUSTRY - 1.3% Nomura Securities Co. Ltd. 270,000 $ 3,282,891 Osaka Securities Finance Co. Ltd. Ord. 22,000 37,433 3,320,324 TOTAL FINANCE 26,911,251 HEALTH - 7.5% DRUGS & PHARMACEUTICALS - 4.7% Banyu Pharmaceutical Co. Ltd. 170,000 2,188,595 Sankyo Co. Ltd. 190,000 4,691,888 Takeda Chemical Industries Ltd. 165,000 4,695,652 11,576,135 MEDICAL EQUIPMENT & SUPPLIES - 2.8% Hoya Corp. 145,000 4,781,479 Terumo Corp. 150,000 2,188,594 6,970,073 TOTAL HEALTH 18,546,208 INDUSTRIAL MACHINERY & EQUIPMENT - 9.8% ELECTRICAL EQUIPMENT - 4.7% Fuji Heavy Industries Ltd. 200,000 892,904 Mirai Industry Co. Ltd. 80,000 810,088 Mitsubishi Electric Co. Ord. 700,000 1,791,831 NGK Insulators Ltd. 400,000 3,514,399 Omron Corp. 300,000 4,686,618 11,695,840 INDUSTRIAL MACHINERY & EQUIPMENT - 5.1% Disco Corp. 22,000 629,400 Fuji Machine Manufacturing Co. Ltd. Ord. 130,000 3,699,605 Glory Ltd. 50,000 835,686 Komatsu Ltd. Ord. 600,000 2,710,333 Mabuchi Motor Co. 40,000 2,306,795 Misumi Corp. 40,000 704,687 THK Co. Ltd. 200,000 1,912,291 12,798,797 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 24,494,637 MEDIA & LEISURE - 3.8% ENTERTAINMENT - 0.9% Sony Music Entertainment Japan, Inc. 60,000 2,339,921 LEISURE DURABLES & TOYS - 2.9% Nintendo Co. Ltd. Ord. 30,000 2,741,954 Shimano, Inc. 200,000 4,411,820 7,153,774 TOTAL MEDIA & LEISURE 9,493,695 NONDURABLES - 1.1% HOUSEHOLD PRODUCTS - 1.1% Uni Charm Corp. Ord. 75,000 2,823,264 RETAIL & WHOLESALE - 2.4% APPAREL STORES - 0.2% Charle Co. Ltd. 70,000 584,980 GENERAL MERCHANDISE STORES - 1.3% Ito-Yokado Co. Ltd. 51,000 2,630,152 Matsumotokiyoshi Co. Ltd. 20,000 688,123 3,318,275 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 0.9% Amway Japan Ltd. 50,000 $ 692,641 Paris Miki, Inc. 54,900 880,384 Senshukai Co. Ltd. 110,000 542,443 2,115,468 TOTAL RETAIL & WHOLESALE 6,018,723 SERVICES - 4.9% LEASING & RENTAL - 1.7% Orix Corp. 60,000 4,133,258 PRINTING - 1.4% Riso Kagaku Corp. 45,000 2,341,050 Toppan Forms Co. Ltd. 90,000 1,077,357 3,418,407 SERVICES - 1.8% Benesse Corp. 66,000 2,126,708 Meitec Corp. 50,000 1,637,493 Nippon System Development Co. 34,000 844,720 4,608,921 TOTAL SERVICES 12,160,586 TECHNOLOGY - 26.6% COMPUTER SERVICES & SOFTWARE - 1.1% Daitec Co. Ltd. 60,000 971,203 Konami Industry Co. Ltd. 81,500 1,797,817 2,769,020 COMPUTERS & OFFICE EQUIPMENT - 6.8% Canon, Inc. 283,000 6,668,850 Fujitsu Ltd. 310,000 3,605,872 Hitachi Ltd. 540,000 3,858,159 Nidec Corp. 50,000 2,672,690 16,805,571 ELECTRONIC INSTRUMENTS - 0.6% Tokyo Seimitsu Co. Ltd. 50,000 1,464,333 ELECTRONICS - 15.7% Aiwa Co. Ltd. 170,000 5,055,524 Futaba Corp. 30,000 1,197,064 Hirose Electric Co. Ltd. 80,000 4,029,362 Hitachi Maxell Ltd. 160,000 3,035,573 Japan Aviation Electronics Industries 150,000 553,360 KOA 100,000 986,260 Minebea Co. Ltd. 495,000 5,515,528 Nitto Denko Corp. 200,000 3,041,596 Nichicon Corp. 150,000 1,626,200 Rohm Co. Ltd. 50,000 5,623,941 TDK Corp. 70,000 5,512,516 Tokyo Electron Ltd. 60,000 2,348,955 Wako Electric Co. Ltd. 60,000 632,411 39,158,290 PHOTOGRAPHIC EQUIPMENT - 2.4% Fuji Photo Film Co. Ltd. 80,000 2,836,815 Minolta Camera Co. Ltd. 480,000 3,107,849 5,944,664 TOTAL TECHNOLOGY 66,141,878 TOTAL COMMON STOCKS (Cost $227,146,952) 218,342,504 NONCONVERTIBLE BONDS - 1.5% MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) FINANCE - 1.5% CREDIT & OTHER FINANCE - 1.5% IBJ Preferred Capital Co. LLC (c) (Cost $4,002,000) A3 $ 4,000,000 $ 3,780,000 U.S. TREASURY OBLIGATIONS - 0.1% U.S. Treasury Bill, yield at date of purchase 4.9669%, 7/23/98 (d) (Cost $345,990) Aaa 350,000 346,085 CASH EQUIVALENTS - 10.6% SHARES Taxable Central Cash Fund (b) (Cost $26,364,205) 26,364,205 26,364,205 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $257,859,147) $ 248,832,794 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) PURCHASED 65 Nikkei 225 Stock Index Futures Contracts June 1998 $ 5,086,250 $ (439,140) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 2.0% LEGEND (a) Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,943,298 or 2.4% of net assets. (d) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $346,085. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $67,971,799 and $73,506,772, respectively. The market value of futures contracts opened and closed during the period amounted to $16,479,212 and $10,799,995, respectively. INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $257,911,996. Net unrealized depreciation aggregated $9,079,202, of which $22,824,586 related to appreciated investment securities and $31,903,788 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $52,268,000 of which $31,995,000 and $20,273,000 will expire on October 31, 2003 and 2005, respectively. JAPAN FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 248,832,794 (COST $257,859,147) - SEE ACCOMPANYING SCHEDULE CASH 350,000 RECEIVABLE FOR INVESTMENTS SOLD 109,298 RECEIVABLE FOR FUND SHARES SOLD 579,149 DIVIDENDS RECEIVABLE 718,843 INTEREST RECEIVABLE 187,118 RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 56,875 TOTAL ASSETS 250,834,077 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 1,168,324 PAYABLE FOR FUND SHARES REDEEMED 322,097 ACCRUED MANAGEMENT FEE 205,312 OTHER PAYABLES AND 129,096 ACCRUED EXPENSES TOTAL LIABILITIES 1,824,829 NET ASSETS $ 249,009,248 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 334,321,492 DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (5,374,898) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (70,447,053) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (9,490,293) AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 24,248,567 $ 249,009,248 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($249,009,248 (DIVIDED BY) 24,248,567 SHARES) $10.27 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $10.27) $10.59
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 947,786 DIVIDENDS INTEREST 658,120 1,605,906 LESS FOREIGN TAXES WITHHELD (140,137) TOTAL INCOME 1,465,769 EXPENSES MANAGEMENT FEE $ 883,825 BASIC FEE PERFORMANCE ADJUSTMENT 322,615 TRANSFER AGENT FEES 387,846 ACCOUNTING FEES AND EXPENSES 90,738 NON-INTERESTED TRUSTEES' COMPENSATION 437 CUSTODIAN FEES AND EXPENSES 52,987 REGISTRATION FEES 16,446 AUDIT 18,181 LEGAL 708 REPORTS TO SHAREHOLDERS 23,130 MISCELLANEOUS 368 TOTAL EXPENSES BEFORE REDUCTIONS 1,797,281 EXPENSE REDUCTIONS (6,209) 1,791,072 NET INVESTMENT INCOME (LOSS) (325,303) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (17,931,677) FOREIGN CURRENCY TRANSACTIONS (34,284) FUTURES CONTRACTS (153,827) (18,119,788) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 2,676,454 ASSETS AND LIABILITIES IN (23,317) FOREIGN CURRENCIES FUTURES CONTRACTS (439,140) 2,213,997 NET GAIN (LOSS) (15,905,791) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (16,231,094) OTHER INFORMATION $ 197,265 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 1,565 EXPENSE REDUCTIONS $ 6,209 DIRECTED BROKERAGE ARRANGEMENTS
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ (325,303) $ (1,581,245) NET INVESTMENT INCOME (LOSS) NET REALIZED GAIN (LOSS) (18,119,788) (19,143,235) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 2,213,997 9,840,199 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (16,231,094) (10,884,281) DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME (3,904,278) (234,962) SHARE TRANSACTIONS 82,381,197 233,528,383 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 3,837,897 230,693 COST OF SHARES REDEEMED (72,819,984) (258,476,937) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 13,399,110 (24,717,861) REDEMPTION FEES 190,703 897,125 TOTAL INCREASE (DECREASE) IN NET ASSETS (6,545,559) (34,939,979) NET ASSETS BEGINNING OF PERIOD 255,554,807 290,494,786 END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF $5,374,898 AND $1,145,317, $ 249,009,248 $ 255,554,807 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 7,896,652 19,572,662 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 370,453 19,451 REDEEMED (7,036,426) (21,440,377) NET INCREASE (DECREASE) 1,230,679 (1,848,264)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 11.10 $ 11.68 $ 12.08 $ 14.27 $ 13.35 $ 9.84 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) (.01) D (.06) D (.02) D (.02) (.04) D (.09) NET REALIZED AND UNREALIZED GAIN (LOSS) (.65) (.55) (.40) (1.89) 1.31 3.60 TOTAL FROM INVESTMENT OPERATIONS (.66) (.61) (.42) (1.91) 1.27 3.51 LESS DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (.18) (.01) - - - - FROM NET REALIZED GAIN - - - (.36) (.39) - TOTAL DISTRIBUTIONS (.18) (.01) - (.36) (.39) - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .04 .02 .08 .04 - NET ASSET VALUE, END OF PERIOD $ 10.27 $ 11.10 $ 11.68 $ 12.08 $ 14.27 $ 13.35 TOTAL RETURN B, C (5.87)% (4.89)% (3.31)% (12.96)% 10.45% 35.67% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 249,009 $ 255,555 $ 290,495 $ 343,981 $ 469,639 $ 118,195 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.54% A 1.42% 1.15% 1.15% 1.42% 1.71% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.54% A 1.40% E 1.14% E 1.15% 1.42% 1.71% RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (.28)% A (.54)% (.12)% (.06)% (.32)% (.77)% PORTFOLIO TURNOVER RATE 63% A 70% 83% 86% 153% 257% AVERAGE COMMISSION RATE F $ .0228 $ .0269 $ .0364 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
JAPAN SMALL COMPANIES PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY JAPAN SMALL COMPANIES -6.63% -11.68% -39.30% FIDELITY JAPAN SMALL COMPANIES -9.44% -14.33% -41.12% (INCL. 3.00% SALES CHARGE) TOKYO STOCK EXCHANGE -14.79% -24.15% -44.71% SECOND SECTION TOPIX -12.44% -17.80% -30.83% JAPANESE FUNDS AVERAGE -7.32% -10.98% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Tokyo Stock Exchange Second Section Stock Price Index and the Tokyo Stock Exchange Index (TOPIX), a market capitalization weighted index of over 1,100 stocks traded in the Japanese market. The Second Section Index reflects the performance of the smaller, less established and newly listed companies which comprise the second section of the Tokyo Stock Exchange, while the TOPIX reflects the performance of the larger company stocks listed in the first section. To measure how the fund's performance stacked up against its peers, you can compare the fund's performance to the Japanese funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. the past six months average represents a peer group of 34 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY JAPAN SMALL COMPANIES -11.68% -18.13% FIDELITY JAPAN SMALL COMPANIES -14.33% -19.12% (INCL. 3.00% SALES CHARGE) TOKYO STOCK EXCHANGE -24.15% -21.13% SECOND SECTION TOPIX -17.80% -13.73% JAPANESE FUNDS AVERAGE -10.98% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Japan Small Companies TOPIX 00360 TK001 1995/11/01 9700.00 10000.00 1995/11/30 9661.20 10703.96 1995/12/31 10262.60 11183.17 1996/01/31 10107.40 11075.87 1996/02/29 9894.00 10898.23 1996/03/31 10272.30 11264.01 1996/04/30 11028.90 12021.09 1996/05/31 10602.10 11438.95 1996/06/30 10679.70 11493.87 1996/07/31 10185.00 10936.10 1996/08/31 9709.70 10475.85 1996/09/30 9632.10 10777.60 1996/10/31 8856.10 10060.55 1996/11/30 8477.80 10140.85 1996/12/31 7738.69 9364.33 1997/01/31 7036.95 8360.12 1997/02/28 7027.20 8525.70 1997/03/31 6637.34 8212.91 1997/04/30 6666.58 8414.61 1997/05/31 7748.44 9460.89 1997/06/30 8099.31 10074.24 1997/07/31 7797.17 9681.63 1997/08/31 6773.79 8818.81 1997/09/30 6471.65 8548.44 1997/10/31 6305.96 7899.69 1997/11/30 5643.20 7304.53 1997/12/31 5389.64 6733.86 1998/01/31 5946.18 7453.91 1998/02/28 5985.23 7515.90 1998/03/31 5467.75 7009.39 1998/04/30 5887.60 6917.14 IMATRL PRASUN SHR__CHT 19980430 19980506 115039 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Japan Small Companies Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have been $5,888 - a 41.12% decrease on the initial investment. For comparison, look at how the Tokyo Stock Exchange Second Section Stock Price Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have been $5,529 - a 44.71% decrease. Beginning with this report, the fund will compare its performance to that of the Tokyo Stock Exchange Second Section Stock Price Index rather than the Tokyo Stock Exchange Index (TOPIX). The Second Section Index provides a better indication of the performance of Japanese small-capitalization stocks than the TOPIX, which generally includes larger companies. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) JAPAN SMALL COMPANIES FUND TALK: THE MANAGER'S OVERVIEW An interview with Kenichi Mizushita, Portfolio Manager of Fidelity Japan Small Companies Fund Q. KENICHI, HOW DID THE FUND PERFORM? A. For the six months that ended April 30, 1998, the fund had a total return of -6.63%. During the same period, the Japanese funds average - which comprises mainly large-cap-oriented funds - fell 7.32%, according to Lipper Analytical Services, and the Second Section Stock Price Index was down 14.79%. For the 12 months that ended April 30, 1998, the fund returned -11.68%, compared to the Second Section Price Index's return of -24.15%, and the Lipper Japanese funds average return of -10.98%. Q. HOW WOULD YOU CHARACTERIZE THE SIX-MONTH PERIOD THAT ENDED APRIL 30, 1998? A. Fears of a credit crunch, accelerated by the failure of large financial institutions to reassure investors, caused the market to continue its negative performance. "Small-caps" were less attractive than "large-caps" in an environment of eroding confidence in the Japanese economy. As a result, small-cap stocks underperformed large-cap stocks. However, the stock market has been gradually improving since the beginning of this calendar year, recovering from the effects of oversold stocks last year. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE INDEX OVER THE PAST SIX MONTHS? A. Events in the market - including bankruptcies and erosion of confidence due to less-than-full disclosure by some of the large-cap companies - forced investors to avoid weaker companies with unhealthy balance sheets. The fund focused on companies with strong market shares. With most of these companies leaders in their niche markets, their profits have been increasing. The fund's focus on these stronger companies was the biggest factor in explaining why it outperformed the market. However, the factors mentioned above that negatively affected larger companies also hit smaller companies to a greater extent, because their shares are not traded as frequently as shares of large companies, and are relatively riskier investments. Although money has come into the Japanese small stock market, the credit crunch and infrequent trading of many stocks have accelerated disinterest in smaller companies. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? A. Union Tool and Meitec, the fund's number one and number three holdings, respectively, both did well. Union Tool, a long-term holding, is a manufacturer of drills for printed circuit boards. Demand has been increasing strongly from electronics industry customers in Japan, Southeast Asia and the U.S. As a result, Union Tool's business has been strong and steady, with predictable demand and earnings. Meitec provides temporary engineering staff to Japanese companies who are unwilling to add to their permanent engineering staff in this uncertain economic environment. Meitec's business has remained very strong. Sony Music, another top holding, has been underweighted in the fund's portfolio relative to the Second Section Index. Sony Music's relative performance was good during the period, but its absolute performance has not been very impressive. Q. YOU'VE ADDED SOME NEW NAMES TO THE FUND'S PORTFOLIO. WHAT WAS THEIR APPEAL? A. Uyemura, one of the fund's new top 10 holdings, has been a good choice. This company manufactures chemicals used in coating computers' hard disk drives. Uyemura commands a 65% market share and its business has been very profitable due to a diverse international customer base. In addition to its core business, the company has also started to supply chemicals for Intel's circuit board packaging, which presented a great opportunity for Uyemura to increase profits. Japan Lifeline is a wholesaler and importer of medical supplies, primarily pacemakers. The company's new product, Stent - used to help open up clogged arteries - shows promise. This stock has performed well. Trans Cosmos, a business software development company, has expanded its business into telemarketing software for the Internet, and has developed customized software for networking, an area of good potential growth in Japan. Demand for these products and Trans Cosmos' profits have been increasing at a relatively healthy rate. Glory is Japan's largest money handling machine manufacturer, with an 80% market share in Japan. Deregulation will require Japanese banks and other financial institutions to become more efficient, and Glory could be one of the primary suppliers of efficient money processing machinery. Q. ALTHOUGH THE FUND'S PERFORMANCE WAS STRONGER THAN ITS BENCHMARK, IT WAS STILL OPERATING IN A NEGATIVE MARKET ENVIRONMENT . . . A. Unfortunately, the Japanese market and economy have not yet seen a turnaround. The same factors that have been driving the stock market's fall are still in place. Consumption has dropped dramatically in Japan, and many companies have revised their earnings projections downward. Reflecting this, many of the fund's holdings performed poorly. Q. WITH A BLEAK STOCK MARKET ENVIRONMENT, THERE MUST HAVE BEEN A NUMBER OF STOCKS WHOSE PERFORMANCE WAS DISAPPOINTING DURING THE PERIOD . . . A. Yes. Examples included Konami, a video game manufacturer; Shindengen Electric, Honma Golf, Nitto Kohki, and Fuji Denki. I'm still holding some shares of Nitto Kohki, but all the others were sold from the portfolio. Reflecting continued low consumer activity, retailers such as Fast Retailing Company were disappointments. Fast Retailing, a clothing retailer in Japan, has been expanding the number of its clothing outlets by about 40 outlets per year. Significantly weak consumption in Japan, particularly in the clothing area, caused Fast to miss its earnings targets, so its stock dropped when the company revised its earnings projection downward. On the manufacturing side, the performance of Keihin also was poor. Keihin is one of the largest parts makers for Honda. Although Honda's performance was boosted by sales overseas, Keihin's performance over the past six months lagged because car sales in Japan declined. I believe that the stock market was looking for a further slowing of demand, and as a result, auto-parts manufacturers were out of favor. However, Keihin is a very competitive company, based on its market share. Jafco, a venture capital company, is one of the larger companies listed in the over-the-counter market in Japan. The performance of this market has been extremely disappointing, affecting the number of initial public offerings brought to market. As a result, investors have lost interest. If Japan continues to deregulate its markets and welcome new companies to the stock market, the long-term opportunities for venture capital companies could be positive. Q. WHAT IS YOUR OUTLOOK, KENICHI? A. At this time, there is not much good news. There has been a real loss of faith in the Japanese economy, resulting from bankruptcies and the lack of true disclosure in companies' financial statements. The economy is not very strong, so a solid turnaround is not likely at this point in time. There are still many problems in the Japanese market due to increasing inventories and weak consumption. There are some positive signs, though. The Japanese government announced its economic reform package on April 24, aiming to provide traditional public works funding, investment in Japan's telecommunications infrastructure and planned income tax cuts. These are much-needed steps designed to spur consumption and increase consumer demand in Japan. Further, small-cap stock valuations are very attractive right now. If, in the near future, the gross domestic product in Japan shows a positive growth rate, this would be very good news for smaller companies, which tend to be more sensitive to changes in the economy. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. KENICHI MIZUSHITA ON THE "SHAREHOLDER-FRIENDLY" MOVEMENT IN JAPAN: "The shareholder-friendly movement, where companies pay greater attention to the interests of investors, has started to take hold in Japan. Japanese companies are beginning to focus more on shareholder value and to become more cognizant of the real cost of capital. Reflecting this change in management practice, the number of share buybacks has grown from 186 in 1997 to nearly 800 so far in 1998. As more companies have announced their intentions to change their articles of incorporation - which would allow for more share buybacks - this has set the stage for a shift in the stock market's supply/demand scenario, potentially resulting in a decline in the supply of available equity shares in the Japanese stock market. Japanese banks, which have historically tended to own a good portion of the stocks of companies with whom they had business relationships, have been unloading these stocks. As a result, more shares are being purchased by the investing public, who are demanding greater disclosure from the companies whose shares they hold. "The substantial increase in share buyback activity has occurred at the same time that Japanese companies are becoming more aware of returns on capital, placing greater emphasis on increasing their asset values. It is also notable that the growth in this area has been more pronounced in small- and mid-cap companies than in the large-cap arena. "The primary reason for greater share buyback activity and for its characterization as "shareholder-friendly", is that its goal is to increase the value of outstanding shares, thereby increasing returns for investors." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Japanese issuers with small market capitalizations FUND NUMBER: 360 TRADING SYMBOL: FJSCX START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $105 million MANAGER: Kenichi Mizushita, since 1996; manager several Fidelity Investments Japan, Ltd., and institutional funds; joined Fidelity in 1985. (checkmark) JAPAN SMALL COMPANIES INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 7.7% ROW: 1, COL: 1, VALUE: 92.3 ROW: 1, COL: 2, VALUE: 7.7 JAPAN 92.3% AS OF OCTOBER 31, 1997 UNITED STATES 0.4% ROW: 1, COL: 1, VALUE: 98.59999999999999 ROW: 1, COL: 2, VALUE: 1.4 JAPAN 99.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 92.3 99.6 SHORT-TERM INVESTMENTS 7.7 0.4 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO UNION TOOL CO. 4.1 2.9 (INDUSTRIAL MACHINERY & EQUIPMENT) SONY MUSIC ENTERTAINMENT JAPAN, INC. 4.1 4.1 (ENTERTAINMENT) MEITEC CORP. 4.0 4.6 (SERVICES) C. UYEMURA & CO. LTD. 3.7 0.0 (CHEMICALS & PLASTIC) SHOHKOH FUND & CO. LTD. 3.5 1.4 (CREDIT & OTHER FINANCE) NIPPON SYSTEM DEVELOPMENT CO. 2.9 2.3 (SERVICES) ADERANS CO. LTD. 2.2 3.1 (CONSUMER DURABLES) MISUMI CORP. 2.2 2.0 (INDUSTRIAL MACHINERY & EQUIPMENT) JAPAN LIFELINE CO. LTD. 2.1 0.0 (MEDICAL EQUIPMENT & SUPPLIES) FUJI SOFT, INC. 2.1 2.5 (COMPUTER SERVICES & SOFTWARE) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 21.5 33.7 INDUSTRIAL MACHINERY & EQUIPMENT 13.3 11.6 SERVICES 9.6 9.9 MEDIA & LEISURE 8.2 8.6 FINANCE 8.2 5.7 RETAIL & WHOLESALE 7.4 8.0 BASIC INDUSTRIES 6.3 3.0 NONDURABLES 5.0 3.9 DURABLES 4.6 8.5 CONSTRUCTION & REAL ESTATE 4.5 5.8 JAPAN SMALL COMPANIES INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 92.3% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.7% Jamco Corp. 75,000 $ 773,574 BASIC INDUSTRIES - 6.3% CHEMICALS & PLASTICS - 5.7% C. Uyemura & Co. Ltd. 149,000 3,926,215 Canon Chemicals, Inc. 100,000 1,114,248 Nippon Pillar Packing Co. Ltd. 160,000 831,169 Toshiba Chemical Corp. 40,000 88,839 5,960,471 METALS & MINING - 0.2% Oiles Corp. 9,300 230,356 PAPER & FOREST PRODUCTS - 0.4% Ube-Nitto Kasei Co. Ltd. 120,000 417,391 TOTAL BASIC INDUSTRIES 6,608,218 CONSTRUCTION & REAL ESTATE - 4.5% BUILDING MATERIALS - 1.2% Arc Land Sakamoto Co. Ltd. 136,000 747,450 Kondotec, Inc. 100,000 504,423 1,251,873 ENGINEERING - 1.3% Ataka Construction & Engineering Co. Ltd. 150,000 525,127 Sawako Corp. 102,500 841,144 1,366,271 REAL ESTATE - 2.0% Meiwa Estate Co. Ltd. 75,000 671,937 Sekiwa Real Estate Ltd. 99,000 298,137 Toc Company Ltd. 123,600 1,144,574 2,114,648 TOTAL CONSTRUCTION & REAL ESTATE 4,732,792 DURABLES - 4.6% AUTOS, TIRES, & ACCESSORIES - 2.4% FCC Co. Ltd. 42,000 388,933 Keihin Seiki Manufacturing Co. Ltd. 40,000 522,492 Piolax, Inc. 50,000 481,837 Sanyo Denki Co. Ltd. 140,000 664,032 Yachiyo Industry Co. Ltd. 80,000 442,688 2,499,982 CONSUMER DURABLES - 2.2% Aderans Co. Ltd. 100,000 2,356,484 TOTAL DURABLES 4,856,466 FINANCE - 8.2% CREDIT & OTHER FINANCE - 8.2% Aeon Credit Service Ltd. 20,000 933,559 Acom Co. Ltd. 20,000 1,052,513 Jafco Co. Ltd. 33,000 1,095,652 Shohkoh Fund & Co. Ltd. 11,500 3,645,022 Takefuji Corp. 36,000 1,883,681 8,610,427 HEALTH - 3.0% MEDICAL EQUIPMENT & SUPPLIES - 3.0% Hogy Medical Co. 31,500 953,360 Japan Lifeline Co. Ltd. (a) 100,000 2,198,381 3,151,741 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 13.3% ELECTRICAL EQUIPMENT - 1.4% Hakuto Co. Ltd. 50,000 $ 715,227 SUNX Ltd. 86,000 725,165 1,440,392 INDUSTRIAL MACHINERY & EQUIPMENT - 11.9% Glory Ltd. 80,000 1,337,098 Misumi Corp. 130,100 2,291,993 Nitto Kohki Co. Ltd. 80,120 925,912 Shinkawa Ltd. 20,000 346,320 THK Co. Ltd. 120,000 1,147,374 Tsudakoma Corp. 100,000 221,344 Union Tool Co. 116,000 4,366,648 Yushin Precision Equipment Co. Ltd. 138,000 1,984,416 12,621,105 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 14,061,497 MEDIA & LEISURE - 8.2% ENTERTAINMENT - 4.1% Sony Music Entertainment Japan, Inc. 110,000 4,289,855 LEISURE DURABLES & TOYS - 1.9% Ryohin Keikaku Co. Ltd. 23,300 1,982,232 PUBLISHING - 0.8% Asia Securities Printing Co. Ltd. 84,000 872,727 RESTAURANTS - 1.4% Saizeriya Co. Ltd. 40,000 755,882 Yoshinoya D&C Co. Ltd. Ord. 88 728,778 1,484,660 TOTAL MEDIA & LEISURE 8,629,474 NONDURABLES - 5.0% FOODS - 4.1% Ariake Japan 15,000 409,938 Q'Sai Co. Ltd. 40,000 484,848 Rock Field Co. Ltd. 147,000 2,019,763 Yonekyu Corp. 105,000 1,379,447 4,293,996 HOUSEHOLD PRODUCTS - 0.9% Comany, Inc. 124,000 980,237 TOTAL NONDURABLES 5,274,233 RETAIL & WHOLESALE - 7.4% APPAREL STORES - 1.4% Fast Retailing Co. Ltd. 60,000 591,756 Naigai Clothes Co. Ltd. 155,000 863,542 1,455,298 GENERAL MERCHANDISE STORES - 4.1% Circle K Japan Co. Ltd. 34,100 1,399,172 Himaraya Co. Ltd. 64,500 582,722 Homac Corp. 70,000 595,520 Matsumotokiyoshi Co. Ltd. 52,500 1,806,324 4,383,738 RETAIL & WHOLESALE, MISCELLANEOUS - 1.9% Don Quijote Co. Ltd. 13,800 529,870 Paris Miki, Inc. 40,000 641,445 Yamada Denki Co. Ltd. 80,000 837,192 2,008,507 TOTAL RETAIL & WHOLESALE 7,847,543 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 9.6% Aucnet, Inc. (a) 49,000 $ 741,502 BellSystem24, Inc. 14,700 2,031,937 Meitec Corp. 130,000 4,257,482 Nippon System Development Co. 125,000 3,105,590 10,136,511 TECHNOLOGY - 21.5% COMPUTER SERVICES & SOFTWARE - 6.5% Diamond Computer Service Co. Ltd. 53,000 798,043 Fuji Soft, Inc. 61,400 2,177,256 Ines Corp. Ord. 80,000 584,227 Sumisho Computer Service Corp. 90,000 1,856,578 Trans Cosmos, Inc. 50,000 1,445,511 6,861,615 COMPUTERS & OFFICE EQUIPMENT - 2.7% Argotechnos 21Corp. (a) 63,000 1,233,202 IO Data Device, Inc. 20,000 225,861 Toyo Information System Co. Ltd. 100,000 1,347,638 2,806,701 ELECTRONIC INSTRUMENTS - 4.2% Cosel Co. Ltd. 100,000 978,731 Micronics Japan Co. Ltd. 10,000 240,918 Sony Chemicals Corp. 76,000 1,430,454 Tokyo Seimitsu Co. Ltd. 63,000 1,845,059 4,495,162 ELECTRONICS - 6.3% Fujitsu Business Systems Ltd. 20,000 308,677 Kyoden Co. Ltd. 93,800 2,118,577 Mimasu Semiconductor Industries Co. Ltd. 147,000 2,158,103 Nippon Ceramic Co. Ltd. 94,000 969,546 Shinko Electric Industries Co. Ltd. 11,000 477,847 Towa Corp. 22,000 619,462 6,652,212 PHOTOGRAPHIC EQUIPMENT - 1.8% Noritsu Koki Co. Ltd. 34,000 1,011,105 Ricoh Elemex Corp. 130,000 880,858 1,891,963 TOTAL TECHNOLOGY 22,707,653 TOTAL COMMON STOCKS (Cost $108,286,169) 97,390,129 CASH EQUIVALENTS - 7.7% Taxable Central Cash Fund (b) (Cost $8,124,655) 8,124,655 8,124,655 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $116,410,824) $ 105,514,784 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $32,953,409 and $12,198,878, respectively. INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $116,457,295. Net unrealized depreciation aggregated $10,942,511, of which $9,555,852 related to appreciated investment securities and $20,498,363 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $38,186,000 all of which will expire on October 31, 2005. JAPAN SMALL COMPANIES FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 105,514,784 (COST $116,410,824) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 4,251 RECEIVABLE FOR FUND SHARES SOLD 322,722 DIVIDENDS RECEIVABLE 285,312 INTEREST RECEIVABLE 41,448 REDEMPTION FEES RECEIVABLE 21 TOTAL ASSETS 106,168,538 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 292,655 PAYABLE FOR FUND SHARES REDEEMED 92,450 ACCRUED MANAGEMENT FEE 62,751 OTHER PAYABLES AND 60,583 ACCRUED EXPENSES TOTAL LIABILITIES 508,439 NET ASSETS $ 105,660,099 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 161,786,723 DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (602,010) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (44,621,875) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (10,902,739) AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 17,528,394 $ 105,660,099 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($105,660,099 (DIVIDED BY) 17,528,394 SHARES) $6.03 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $6.03) $6.22
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 412,943 DIVIDENDS INTEREST 247,459 660,402 LESS FOREIGN TAXES WITHHELD (61,316) TOTAL INCOME 599,086 EXPENSES MANAGEMENT FEE $ 334,764 TRANSFER AGENT FEES 136,984 ACCOUNTING FEES AND EXPENSES 34,472 NON-INTERESTED TRUSTEES' COMPENSATION 157 CUSTODIAN FEES AND EXPENSES 22,913 REGISTRATION FEES 12,856 AUDIT 16,974 LEGAL 243 REPORTS TO SHAREHOLDERS 7,504 MISCELLANEOUS 124 TOTAL EXPENSES BEFORE REDUCTIONS 566,991 EXPENSE REDUCTIONS (55) 566,936 NET INVESTMENT INCOME 32,150 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (6,263,235) FOREIGN CURRENCY TRANSACTIONS (35,686) (6,298,921) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 264,473 ASSETS AND LIABILITIES IN (6,256) 258,217 FOREIGN CURRENCIES NET GAIN (LOSS) (6,040,704) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,008,554) OTHER INFORMATION $ 84,929 SALES CHARGES PAID TO FDC EXPENSE REDUCTIONS $ 55 CUSTODIAN CREDITS
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 32,150 $ (431,691) NET INVESTMENT INCOME (LOSS) NET REALIZED GAIN (LOSS) (6,298,921) (38,200,071) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 258,217 7,160,981 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (6,008,554) (31,470,781) DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME (141,696) (53,184) FROM NET REALIZED GAIN - (359,714) TOTAL DISTRIBUTIONS (141,696) (412,898) SHARE TRANSACTIONS 51,876,265 128,561,609 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 141,028 410,794 COST OF SHARES REDEEMED (24,607,920) (118,965,973) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 27,409,373 10,006,430 REDEMPTION FEES 127,027 486,767 TOTAL INCREASE (DECREASE) IN NET ASSETS 21,386,150 (21,390,482) NET ASSETS BEGINNING OF PERIOD 84,273,949 105,664,431 END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF $602,010 AND $492,464, RESPECTIVELY) $ 105,660,099 $ 84,273,949 OTHER INFORMATION SHARES SOLD 8,723,851 16,940,710 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 25,139 49,197 REDEEMED (4,236,042) (15,551,026) NET INCREASE (DECREASE) 4,512,948 1,438,881
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 6.47 $ 9.13 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) D - (.03) (.03) NET REALIZED AND UNREALIZED GAIN (LOSS) (.44) (2.63) (.87) TOTAL FROM INVESTMENT OPERATIONS (.44) (2.66) (.90) LESS DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (.01) (.01) - FROM NET REALIZED GAIN - (.03) - TOTAL DISTRIBUTIONS (.01) (.04) - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .04 .03 NET ASSET VALUE, END OF PERIOD $ 6.03 $ 6.47 $ 9.13 TOTAL RETURN B, C (6.63)% (28.80)% (8.70)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 105,660 $ 84,274 $ 105,664 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.28% A 1.35% 1.34% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.28% A 1.34% E 1.34% RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS .07% A (.46)% (.32)% PORTFOLIO TURNOVER RATE 30% A 101% 66% AVERAGE COMMISSION RATE F $ .0603 $ .0511 $ .0578 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
LATIN AMERICA PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY LATIN AMERICA 12.65% 11.50% 82.33% 81.24% FIDELITY LATIN AMERICA 9.27% 8.16% 76.86% 75.80% (INCL. 3.00% SALES CHARGE) MSCI EMF - LATIN AMERICA 7.97% 6.42% 113.48% 105.57% LATIN AMERICAN REGION 10.14% 7.69% 64.57% N/A FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on April 19, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Emerging Markets Free - Latin America Index - a market capitalization weighted index of approximately 170 stocks traded in seven Latin American markets. To measure how the fund's performance stacked up against its peers, you can compare it to the Latin American funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 42 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY LATIN AMERICA 11.50% 12.76% 12.54% FIDELITY LATIN AMERICA 8.16% 12.08% 11.86% (INCL. 3.00% SALES CHARGE) MSCI EMF - LATIN AMERICA 6.42% 16.38% 15.39% LATIN AMERICAN FUNDS AVERAGE 7.69% 10.26% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Latin America MS Latin Amer. Fr (Gross) 00349 MS007 1993/04/19 9700.00 10000.00 1993/04/30 9641.80 9629.27 1993/05/31 9874.60 9880.87 1993/06/30 10379.00 10503.42 1993/07/31 10737.90 10785.19 1993/08/31 11746.70 11714.82 1993/09/30 11960.10 11920.39 1993/10/31 12881.60 12392.75 1993/11/30 13861.30 13204.75 1993/12/31 15722.24 14878.84 1994/01/31 16981.97 17327.50 1994/02/28 16093.32 16826.00 1994/03/31 14462.50 15684.24 1994/04/30 13437.14 14487.31 1994/05/31 14169.54 15343.10 1994/06/30 12851.22 14360.38 1994/07/31 14042.59 15721.44 1994/08/31 16132.38 18278.52 1994/09/30 16679.24 19062.61 1994/10/31 15829.65 18120.86 1994/11/30 15360.92 17604.02 1994/12/31 12079.76 14974.08 1995/01/31 10331.75 13338.86 1995/02/28 8710.70 11406.56 1995/03/31 8564.22 11013.06 1995/04/30 9618.88 12602.53 1995/05/31 9667.71 12888.85 1995/06/30 9804.43 13089.71 1995/07/31 10331.75 13494.70 1995/08/31 10527.06 13648.86 1995/09/30 10361.05 13532.50 1995/10/31 9521.23 12443.72 1995/11/30 9863.02 12667.34 1995/12/31 10090.87 13052.35 1996/01/31 11504.18 14390.58 1996/02/29 10901.30 13561.89 1996/03/31 11316.40 13731.96 1996/04/30 11800.68 14492.29 1996/05/31 12373.92 14958.43 1996/06/30 12709.95 15342.23 1996/07/31 12186.13 14737.59 1996/08/31 12561.70 15152.37 1996/09/30 12759.37 15498.77 1996/10/31 12443.10 15347.63 1996/11/30 12601.23 15494.03 1996/12/31 13190.77 15951.46 1997/01/31 14347.85 17521.55 1997/02/28 15122.60 18680.87 1997/03/31 15032.04 18395.98 1997/04/30 15766.54 19316.04 1997/05/31 16903.50 20684.98 1997/06/30 18352.37 22458.18 1997/07/31 19569.83 23720.20 1997/08/31 17436.77 21447.02 1997/09/30 19217.67 23503.38 1997/10/31 15605.55 19038.69 1997/11/30 16662.02 19689.74 1997/12/31 17528.97 20998.04 1998/01/31 15788.29 18665.66 1998/02/28 16541.56 19646.12 1998/03/31 17579.87 21039.04 1998/04/30 17579.87 20557.00 IMATRL PRASUN SHR__CHT 19980430 19980506 115542 R00000000000064 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Latin America Fund on April 19, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $17,580 - a 75.80% increase on the initial investment. For comparison, look at how the Morgan Stanley Capital International Emerging Markets Free - Latin America Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $20,557 - a 105.57% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) LATIN AMERICA FUND TALK: THE MANAGER'S OVERVIEW An interview with Patti Satterthwaite, Portfolio Manager of Fidelity Latin America Fund Q. HOW DID THE FUND PERFORM, PATTI? A. The fund outperformed both its peer group and index over the six-month period that ended April 30, 1998. During that period, the fund provided a return of 12.65%. To compare the fund's performance with that of its peers, the Latin American funds average returned 10.14% for the same six-month period, according to Lipper Analytical Services. To gauge how the fund did relative to Latin American markets, the Morgan Stanley Capital International Emerging Markets Free-Latin America Index returned 7.97%. For the 12-month period that ended April 30, 1998, the fund returned 11.50%, while the peer group and index had returns of 7.69% and 6.42%, respectively. Q. AS A GROUP, THE LATIN AMERICAN MARKETS STRUGGLED OVER THE PAST SIX MONTHS. WHAT WAS TROUBLING THEM? A. The primary trouble resulted from financial and economic turmoil in Southeast Asia. Attacks on the Hong Kong dollar just prior to the beginning of the period prompted a massive sell-off of all emerging-market stocks, including Latin American stocks. October saw Latin stocks' largest price declines since the 1994-1995 Mexican peso crisis. Volatility continued to plague Latin stocks into November, as nervous investors sold them to lock in the near-record-breaking profits they earned through mid-1997. Brazil, which had posted the region's best first-half 1997 gains, suffered the biggest losses, although the region's other large market, Mexico, weathered the storm in pretty good shape. In a fairly quick turnabout later in November, Latin American markets rallied. Brazil came back particularly strong in December and pulled up many of the smaller markets in the region along with it. Q. HOW HAVE THE LATIN MARKETS FARED SO FAR IN 1998? A. Brazilian stocks have continued to do fairly well, with the remaining major markets posting flat or negative returns for the first four months of this year. The declining price of oil was the catalyst for the divergence in this year's performance across the various markets. After shrugging off the Asian crisis, Mexico suffered from an oil crisis of sorts as the price of its oil has plummeted by roughly one-third since the end of 1997. Investors feared that lower oil prices would mean less revenue for the government and a widening trade gap that ultimately would put pressure on the peso. Stocks from Venezuela, the region's other large oil exporter, also suffered. In contrast, Brazil benefited from lower oil prices because it is a major importer, rather than an exporter, of oil. Q. WHAT FACTORS HELPED THE FUND OUTPACE ITS PEERS AND ITS INDEX? A. I'd point to three factors: security selection in Brazil, security selection in Mexico and a relatively light weighting in Chilean stocks, which severely lagged the other Latin markets during the past six months. In Brazil, the fund's performance got a boost from its holdings in integrated oil company Petrobras, which profited from the declining price in oil. The other big Brazilian winner was telephone company Telebras. Its success was due to the growing demand for telephones and data transmission, as well as investors' increased appetite for defensive-type companies that are expected to do well even when the economy slows. Q. THE FUND'S HOLDINGS IN VARIOUS SHARES OF TELEBRAS AND ITS SUBSIDIARIES HAVE CHANGED DURING THE PAST SIX MONTHS. WHAT EXPLAINS THE SHIFT? A. Toward the beginning of the period, I had switched some of the fund's investments out of Telebras ON - which is the voting class of shares issued by the company - into the company's Telesp subsidiary. Here's why: Prior to December, Telebras ON stock had historically traded at a 20% to 25% discount to Telebras American Depository Receipts (ADRs) - meaning the voting shares were 20% to 25% cheaper than the ADRs. As a reminder, an ADR is a receipt for the shares of a foreign-based corporation that are traded on stock exchanges in the U.S. But that discount closed to about 5% in December, with the shares of Telebras ON posting strong gains. I locked in that strength by selling the fund's stake in Telebras ON shares and buying Telesp, which was selling rather cheaply at the time because its shares were in abundant supply. Telesp, in turn, performed extremely well and helped the fund's performance. Q. TURNING TO MEXICO, WHICH STOCKS PERFORMED WELL? A. Telefonos De Mexico, or "Telmex," was one of the Mexican market's best performers during the period as well as one of the fund's largest holdings. Although increased competition pushed Mexican phone rates lower, it helped spur telephone usage. The fund's relatively large stake in Mexican banks - including Group Financiero Bancomer - also helped the fund's performance. Thanks to Mexico's relatively healthy economy, many of the banks enjoyed improved asset quality, healthy loan growth and better profitability. Q. WHAT WERE THE DISAPPOINTMENTS DURING THE PERIOD? A. I'd say the biggest disappointment resulted not from something the fund owned, but rather, from something it didn't own. The fund had no investments in Brazilian banks, which performed extremely well over the past six months. I avoided them because I was concerned about high interest rates. In late fall 1997, the Brazilian government raised interest rates to above 40% in order to stave off speculative attacks on its currency. I worried that at those interest rate levels, banks would suffer deteriorating assets and loan losses. But interest rates came down very quickly and bank stock prices rose in concert. Another disappointment had to do with money going out of the fund. As redemptions occurred, I was forced to sell some stocks into a rather weak market, which was a slight negative for performance. Q. WERE THERE ANY PARTICULAR STOCKS OUTSIDE OF BRAZIL AND MEXICO THAT RECENTLY CAUGHT YOUR ATTENTION? A. I continued to like Telecom Argentina. Although increased competition will eventually be a factor in Argentina, it appears to be a couple of years off. What's more, Argentina is a great market for cellular phone service, providing the company greater profits than regular line service. Q. WHAT'S YOUR OUTLOOK? A. Over the short term, I think the Latin American markets will remain volatile and continued uncertainty over Southeast Asia will likely cast a shadow over Latin American stocks. But over the longer term, I'm more optimistic. Earnings for many companies across the region continue to grow at quite a healthy pace. In Mexico, for instance, the average company's operating income is growing at about 20% annually in U.S. dollar terms. Given that growth rate, I believe that many Latin American stocks are priced cheaply relative to comparable stocks in other parts of the world. Furthermore, the regional economy should continue to post decent growth, although at a slightly slower pace than in 1997. But as long as the market is clouded by perception problems, I'll focus on finding solid companies that have proven they can withstand volatility and generally avoid smaller, riskier companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PATTI SATTERTHWAITE ON THE BREAKUP OF TELEBRAS: "Telebras, the government-controlled Brazilian phone monopoly, is set to start privatizing by dividing into 12 new companies - dubbed `Baby Bras' - in the next six months or so. The new companies will include three regional wireline companies without cellular operations, eight cellular entities and one long distance company. The wireline companies are slated to be Telesp, which will serve the populous city and state of Sao Paulo; Tele-Centro/Sul will handle the central and southern states and Brasilia; Tele-Norte/Nordest gets the north and northeast, including Rio de Janeiro; and Embratel will provide domestic and international service nationwide. The cellular units will range from Telesp Cellular to Amazonia Cellular, which will handle wireless service in the rainforests. After the transaction occurs, shareholders of Telebras will receive one share of each of the 12 companies for each share they hold of Telebras. "I view the privatization of Telebras as a positive move, although it will likely cause confusion as investors decide how to play the breakup. Current pent-up demand for phones - where a long wait is common - has made Telebras one of the fastest-growing phone companies in Latin America. I think there is some unrecognized value in Telebras' current stock price which I believe will be released after the company's breakup. But I'll choose carefully among the 12 entities, since all may not emerge as winners." FUND FACTS GOAL: high total investment return by investing mainly in equity and debt securities of Latin American issuers FUND NUMBER: 349 TRADING SYMBOL: FLATX START DATE: April 19, 1993 SIZE: as of April 30, 1998, more than $668 million MANAGER: Patti Satterthwaite, since 1993; assistant manager, Latin American portion of Fidelity Emerging Markets Fund, since 1990; securities and Latin American analyst, 1986-1990; joined Fidelity in 1986 (checkmark) LATIN AMERICA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 ARGENTINA 8.8% ROW: 1, COL: 1, VALUE: 9.4 ROW: 1, COL: 2, VALUE: 36.3 ROW: 1, COL: 3, VALUE: 3.5 ROW: 1, COL: 4, VALUE: 42.0 ROW: 1, COL: 5, VALUE: 8.800000000000001 OTHER 9.4% MEXICO 36.3% BRAZIL 42.0% CHILE 3.5% AS OF OCTOBER 31, 1997 UNITED STATES 7.1% ARGENTINA 10.8% ROW: 1, COL: 1, VALUE: 7.1 ROW: 1, COL: 2, VALUE: 6.8 ROW: 1, COL: 3, VALUE: 32.9 ROW: 1, COL: 4, VALUE: 4.6 ROW: 1, COL: 5, VALUE: 37.8 ROW: 1, COL: 6, VALUE: 10.8 OTHER 6.8% MEXICO 32.9% BRAZIL 37.8% CHILE 4.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 98.0 92.9 SHORT-TERM INVESTMENTS 2.0 7.1 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO TELEBRAS SPONSORED ADR 12.4 6.3 (BRAZIL, TELEPHONE SERVICES) TELEFONOS DE MEXICO SA SPONSORED ADR 6.6 6.9 REPRESENTING ORD. CLASS L SHARES (MEXICO, TELEPHONE SERVICES) TELESP PN (PFD. REG.) 6.5 2.3 (BRAZIL, TELEPHONE SERVICES) PETROBRAS PN (PFD. REG.) 5.6 3.6 (BRAZIL, OIL & GAS) CENTRAIS ELECTRICAS BRASILEIRAS SA 5.4 6.4 (BRAZIL, ELECTRIC UTILITY) YPF SOCIEDAD ANONIMA SPONSORED ADR 4.8 4.8 REPRESENTING CLASS D SHARES (ARGENTINA, OIL & GAS) GRUPO FINANCIERO BANCOMER CLASS B 4.7 2.9 (MEXICO, BANKS) GRUPO CARSO SA DE CV CLASS A-1 4.0 3.9 (MEXICO, TOBACCO) COMPANIA ENERGERTICA MINAS GERAIS 3.3 3.4 (BRAZIL, ELECTRIC UTILITY) PANAMERICAN BEVERAGES, INC. CLASS A 2.9 1.7 (PANAMA, BEVERAGES) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO UTILITIES 40.7 38.1 NONDURABLES 16.0 15.4 ENERGY 11.3 10.8 FINANCE 9.8 8.9 BASIC INDUSTRIES 6.3 8.2 RETAIL & WHOLESALE 5.6 4.4 CONSTRUCTION & REAL ESTATE 3.2 3.8 MEDIA & LEISURE 1.9 1.0 HOLDING COMPANIES 1.6 0.4 PRECIOUS METALS 1.0 1.1 LATIN AMERICA INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 98.0% SHARES VALUE (NOTE 1) ARGENTINA - 8.8% Bansud SA Class B (a) 229,590 $ 2,158,416 Cresud Sacifya sponsored ADR (a) 104,500 2,076,938 Disco SA sponsored ADR (a) 73,300 2,913,675 IRSA (Inversiones Y Representa) SA GDR 43,800 1,702,725 Perez Companc Class B 290,236 1,744,536 Telecom Argentina Class B sponsored ADR 450,100 16,203,600 YPF Sociedad Anonima sponsored ADR representing Class D shares 910,700 31,760,663 58,560,553 BRAZIL - 42.0% Aracruz Celulose SA ADR 227,750 3,587,063 Bradesco PN 65,324,483 599,803 Caemi Mineracao e Metalurgia 2,546,000 182,565 Centrais Electricas Brasileiras SA 810,330,100 36,146,152 Cimento Itau PN Ord. 6,044,000 1,374,177 Companhia Brasileira de Distribuicao Grupo Pao de Acucar sponsored GDR 87,600 2,332,350 Companhia Brasileira de Petroleo Ipiranga SA Class B 321,249,000 4,185,746 Companhia de Electricidade do Estado do Rio de Janeiro 2,008,714,550 1,457,925 Companhia Paranaense de Energia-Copel Class B 23,000 327,750 Compania Cervejaria Brahma ON (Reg.) 117,827 70,065 Compania Cervejaria Brahma PN: (Pfd. Reg.) 25,013,523 16,295,810 (Pfd. Reg.) warrants 4/30/03 (a) 1,895,770 149,201 Compania Energertica Minas Gerais 452,618,000 21,966,955 Compania Paulista de Forca Luz Ord. 18,570,597 2,565,829 Coteminas PN 10,053,310 2,461,569 Dixie Toga SA 1,904,400 1,082,471 Eletropaulo Metropolitana-Electricidade de Sao Paulo SA (a) 17,599,000 2,073,006 Empresa Bandeirante Energia (a) 22,717,000 774,747 Encorpar Redito e Participa SA (a) 11,465,310 31,181 Itausa Investimentos Itau SA 4,623,000 3,921,394 Klabin Industria de Papel e Celulose PN 4,640,165 2,921,533 Light Servicos de Electricidade SA Ord. 5,100,000 2,051,506 Paulista De Forca Luz rights 4/13/98 (a) 80,306 9,417 Perdigao SA PN 1,461,114,630 2,427,642 Perdigao SA ON 23,222,143 36,552 Petrobras PN (Pfd. Reg.) 146,980,000 37,273,584 Souza Cruz Industria Comerico 537,500 4,394,758 Telebras sponsored ADR 675,040 82,228,310 Telesp PN (Pfd. Reg.) 127,579,899 43,398,701 Votorantim Celulose e Papel SA (Pfd. Reg.) 145,251,499 2,794,392 279,122,154 CANADA - 0.2% Bell Canada International, Inc. 61,400 1,373,074 SHARES VALUE (NOTE 1) CHILE - 3.5% Chilectra SA sponsored ADR 37,500 $ 1,045,313 Cristalerias de Chile SA sponsored ADR 124,700 1,691,244 Enersis SA sponsored ADR (a) 164,700 4,848,356 Santa Isabel SA sponsored ADR 114,500 1,889,250 Sociedad Quimica y Minera de Chile sponsord ADR 256,100 11,124,344 Supermercados Unimarc SA sponsored ADR 86,200 932,038 Vina Concha Stet y Toro SA sponsored ADR 61,000 1,982,500 23,513,045 COLOMBIA - 1.4% Banco Ganadero Class C sponsored ADR 79,800 1,476,300 Compania Nacional de Chocolates 136,000 697,640 Noel (Industria Alimenticias) 97,207 183,429 Suramericana de Inversiones SA 440,350 6,776,597 9,133,966 LUXEMBOURG - 0.3% Quilmes Industrial SA sponsored ADR 201,300 2,226,881 MEXICO - 36.3% Apasco SA de CV 1,283,000 8,702,402 Cemex SA, Series B (a) 659,000 3,957,725 Cifra SA de CV: Series C 9,942,200 16,882,540 Series V (a) 1,556,572 2,731,150 Corporacion Geo SA de CV (a) 808,873 5,581,719 Fomento Economico Mexicano SA de CV Class B 1,500,600 11,097,230 Gruma SA Class B (a) 1,396,864 3,204,299 Grupo Carso SA de CV Class A-1 4,280,100 26,914,430 Grupo Financiero Banamex-Accival Class B (a) 5,580,000 17,412,859 Grupo Financiero Bancomer Class B 45,618,700 31,479,695 Grupo Televisa SA de CV sponsored ADR (a) 311,000 12,751,000 Grupo Elektra SA 8,512,700 12,149,543 Grupo Modelo SA de CV Class C Ord. 1,626,800 15,363,797 Grupo Financiero Inbursa SA Class B 3,831,900 11,687,024 Kimberly Clark de Mexico SA Class A 3,556,000 17,440,815 Telefonos de Mexico SA sponsored ADR representing Ord. Class L shares 781,000 44,224,125 241,580,353 PANAMA - 2.9% Panamerican Beverages, Inc. Class A 484,500 19,319,438 PERU - 1.0% Compania de Minas Buenaventura SA: Class B 134,077 1,042,850 Class B sponsored ADR 339,000 5,254,500 Class T 98,541 581,805 6,879,155 VENEZUELA - 1.6% Compania Anonima Nacional Telefonos de Venezuela sponsored ADR 315,400 10,565,900 TOTAL COMMON STOCKS (Cost $452,868,298) 652,274,519 NONCONVERTIBLE BONDS - 0.0% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) BRAZIL - 0.0% Cia Vale Do Rio Doce 0%, 11/19/00 (Cost $0) - BRL 290,000 $ - CASH EQUIVALENTS - 2.0% SHARES Taxable Central Cash Fund (b) (Cost $13,114,817) 13,114,817 13,114,817 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $465,983,115) $ 665,389,336 CURRENCY ABBREVIATIONS BRL - Brazilian real LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $107,751,368 and $293,264,026, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $3,776 for the period. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Basic Industries 6.3% Cash Equivalents 2.0 Construction & Real Estate 3.2 Durables 0.4 Energy 11.3 Finance 9.8 Holding Companies 1.6 Media & Leisure 1.9 Nondurables 16.0 Precious Metals 1.0 Retail & Wholesale 5.6 Services 0.2 Utilities 40.7 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $467,006,964. Net unrealized appreciation aggregated $198,382,372, of which $226,563,811 related to appreciated investment securities and $28,181,439 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $117,765,000 of which $80,150,000, and $37,615,000 will expire on October 31, 2003, and 2004, respectively. LATIN AMERICA FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 665,389,336 (COST $465,983,115) - SEE ACCOMPANYING SCHEDULE RECEIVABLE FOR INVESTMENTS SOLD 2,179,477 RECEIVABLE FOR FUND SHARES SOLD 300,166 DIVIDENDS RECEIVABLE 5,778,759 INTEREST RECEIVABLE 52,171 REDEMPTION FEES RECEIVABLE 298 OTHER RECEIVABLES 9,757 TOTAL ASSETS 673,709,964 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 1,649,532 PAYABLE FOR FUND SHARES REDEEMED 2,672,027 ACCRUED MANAGEMENT FEE 424,060 OTHER PAYABLES AND 720,617 ACCRUED EXPENSES TOTAL LIABILITIES 5,466,236 NET ASSETS $ 668,243,728 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 566,578,451 UNDISTRIBUTED NET INVESTMENT INCOME 4,715,092 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (102,749,275) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 199,699,460 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 38,697,364 $ 668,243,728 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($668,243,728 (DIVIDED BY) 38,697,364 SHARES) $17.27 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $17.27) $17.80
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 9,048,400 DIVIDENDS SPECIAL DIVIDEND FROM CENTRAIS ELECTRICAS BRASILEIRAS SA 2,290,547 INTEREST 852,094 12,191,041 LESS FOREIGN TAXES WITHHELD (909,522) TOTAL INCOME 11,281,519 EXPENSES MANAGEMENT FEE $ 2,823,782 TRANSFER AGENT FEES 1,068,411 ACCOUNTING FEES AND EXPENSES 242,934 NON-INTERESTED TRUSTEES' COMPENSATION 1,961 CUSTODIAN FEES AND EXPENSES 721,650 REGISTRATION FEES 20,237 AUDIT 31,778 LEGAL 2,943 REPORTS TO SHAREHOLDERS 60,952 MISCELLANEOUS 76,116 TOTAL EXPENSES BEFORE REDUCTIONS 5,050,764 EXPENSE REDUCTIONS (30,002) 5,020,762 NET INVESTMENT INCOME 6,260,757 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 19,146,317 FOREIGN CURRENCY TRANSACTIONS (375,211) 18,771,106 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 59,032,452 ASSETS AND LIABILITIES IN 326,067 59,358,519 FOREIGN CURRENCIES NET GAIN (LOSS) 78,129,625 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 84,390,382 OTHER INFORMATION $ 212,550 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 79 EXPENSE REDUCTIONS $ 24,975 DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 2,088 TRANSFER AGENT CREDITS 2,939 $ 30,002
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 6,260,757 $ 10,354,029 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 18,771,106 65,034,745 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 59,358,519 64,919,843 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 84,390,382 140,308,617 DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (10,041,235) (9,458,525) SHARE TRANSACTIONS 76,796,582 704,350,162 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 9,873,399 9,235,878 COST OF SHARES REDEEMED (301,656,492) (595,524,911) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (214,986,511) 118,061,129 REDEMPTION FEES 338,954 1,741,603 TOTAL INCREASE (DECREASE) IN NET ASSETS (140,298,410) 250,652,824 NET ASSETS BEGINNING OF PERIOD 808,542,138 557,889,314 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $4,715,092 AND $8,495,570, RESPECTIVELY) $ 668,243,728 $ 808,542,138 OTHER INFORMATION SHARES SOLD 4,655,425 43,052,799 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 578,067 724,384 REDEEMED (18,651,799) (35,962,567) NET INCREASE (DECREASE) (13,418,307) 7,814,616
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 19, 1993 APRIL 30, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 15.51 $ 12.59 $ 9.75 $ 16.21 $ 13.28 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .14 D, E .20 D .22 .04 .07 .03 NET REALIZED AND UNREALIZED GAIN (LOSS) 1.81 2.92 2.72 (6.52) 2.82 3.23 TOTAL FROM INVESTMENT OPERATIONS 1.95 3.12 2.94 (6.48) 2.89 3.26 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.20) (.23) (.12) - (.05) - FROM NET REALIZED GAIN - - - - (.05) - TOTAL DISTRIBUTIONS (.20) (.23) (.12) - (.10) - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .03 .02 .02 .14 .02 NET ASSET VALUE, END OF PERIOD $ 17.27 $ 15.51 $ 12.59 $ 9.75 $ 16.21 $ 13.28 TOTAL RETURN B, C 12.65% 25.42% 30.69% (39.85)% 22.89% 32.80% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 668,244 $ 808,542 $ 557,889 $ 466,289 $ 888,530 $ 342,934 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.36% A 1.30% 1.32% 1.41% 1.48% 1.94% A RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.35% A, F 1.29% F 1.32% 1.41% 1.48% 1.94% A EXPENSE REDUCTIONS RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.68% A 1.19% 1.48% .97% .47% 1.21% A PORTFOLIO TURNOVER RATE 30% A 64% 70% 57% 77% 72% A AVERAGE COMMISSION RATE G $ .0004 $ .0005 $ .0004 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM CENTRAIS ELECTRICAS BRASILEIRAS WHICH AMOUNTED TO $.05 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
NORDIC PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY NORDIC 26.07% 46.69% 103.23% FIDELITY NORDIC 22.29% 42.28% 97.14% (INCL. 3.00% SALES CHARGE) FT - ACTUARIES WORLD NORDIC 23.14% 43.96% 91.41% EUROPEAN REGION FUNDS AVERAGE 26.03% 39.23% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the FT/S&P - Actuaries World Nordic Index - a market capitalization weighted index of over 90 stocks traded in four Scandinavian markets. To measure how the fund's performance stacked up against its peers, you can compare the fund's performance to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY NORDIC 46.69% 32.86% FIDELITY NORDIC 42.28% 31.25% (INCL. 3.00% SALES CHARGE) FT - ACTUARIES WORLD NORDIC 43.96% 29.71% EUROPEAN REGION FUNDS AVERAGE 39.23% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Nordic FT Nordic 00342 FT002 1995/11/01 9700.00 10000.00 1995/11/30 9845.50 10178.00 1995/12/31 9554.50 9911.00 1996/01/31 9612.70 9809.37 1996/02/29 10204.40 10456.70 1996/03/31 10340.20 10564.18 1996/04/30 10476.00 10606.06 1996/05/31 10990.10 10977.77 1996/06/30 11106.50 11058.76 1996/07/31 10980.40 10822.25 1996/08/31 11630.30 11437.85 1996/09/30 12018.30 11769.52 1996/10/31 12386.90 12210.52 1996/11/30 13269.60 12915.13 1996/12/31 13537.43 13283.75 1997/01/31 13880.77 13676.71 1997/02/28 13969.05 13661.62 1997/03/31 14332.01 14093.06 1997/04/30 13439.33 13296.07 1997/05/31 14302.58 14246.43 1997/06/30 15136.41 15111.48 1997/07/31 15617.09 15775.44 1997/08/31 14999.07 15074.22 1997/09/30 16843.30 16846.82 1997/10/31 15636.71 15544.47 1997/11/30 15705.38 15583.27 1997/12/31 15177.38 15331.98 1998/01/31 15593.63 15587.89 1998/02/28 17077.22 16969.39 1998/03/31 18219.26 18157.18 1998/04/30 19713.51 19141.41 IMATRL PRASUN SHR__CHT 19980430 19980513 152248 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Nordic Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $19,714 - a 97.14% increase on the initial investment. For comparison, look at how the FT/S&P - Actuaries World Nordic Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $19,141 - a 91.41% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) NORDIC FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: On June 1, 1998, after the period covered by this report, Trygve Toraasen (right) became portfolio manager of Fidelity Nordic Fund. The following is an interview with Colin Stone, who managed the fund during the period covered by this report, with comments by Trygve Toraasen on his outlook and investment approach. Q. HOW DID THE FUND PERFORM, COLIN? C.S. For the six months that ended April 30, 1998, the fund returned 26.07%, compared to the 23.14% return of the FT-Actuaries World Nordic Index and the European region funds average of 26.03%, as monitored by Lipper Analytical Services. For the one-year period, the fund returned 46.69%, compared to the FT-Actuaries Index return of 43.96% and the Lipper European regions funds average return of 39.23%. Q. HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT FOR THE SIX MONTHS? C.S. We had a strong market, with good liquidity - or cash flow - into the market. As interest rates declined and bond markets rallied, the equity markets attracted more investors. Corporate earnings throughout the Nordic region grew and were expected to continue growing throughout 1998. Consensus corporate earnings growth estimates for 1998 ranged from a low of 10% in Norway to almost 20% in Sweden and Finland. Moreover, a strong economic recovery seemed to be developing throughout Europe, with very favorable reports from large countries like Germany and France. Growth in the Nordic region was expected to be robust as a result of this broad recovery. Estimates of 1998 growth in gross domestic product in the Nordic countries were very strong: 2.8% in Denmark, 3% in Sweden and 4% in Finland. The one potential area of worry was in Norway, where the economic cycle extended the furthest. There was concern about the economy overheating and setting off inflationary pressures. Q. WHAT WERE YOUR PRINCIPAL AREAS OF EMPHASIS? C.S. I continued to focus the fund on technology - particularly in telecommunications - as well as the finance and health care sectors. At the end of the period, telecommunications equipment companies accounted for 18.8% of portfolio assets, financial companies 19.4%, and health care 13.0%. The fund's two largest holdings continued to be the two giant telecommunications equipment companies, Ericsson of Sweden and Nokia of Finland. The fundamentals for telecommunications remained extremely favorable. Analysts are revising upward the estimates of global subscriber growth in wireless systems, despite the Asian economic crisis. In Finland, for example, mobile phone ownership was expected this year to exceed 50% of the population. To illustrate, it is quite common for school children in Finland to have mobile phones now. Q. WHY HAVE YOU ALSO EMPHASIZED THE FINANCE AND HEALTH CARE SECTORS? C.S. I anticipated further restructuring in the finance sector, and have overweighted banks, particularly Swedish banks. In addition, stock valuations for the Nordic banks were low compared to their competitors in Continental Europe and the United Kingdom. In health care, I had a sizeable holding in Astra of Sweden, a major global pharmaceutical company that accounted for about 8% of portfolio assets. Other health care-related companies included Novo-Nordisk, a pharmaceutical company based in Denmark, and two Swedish dental product companies, Biora and Nobel Biocare. Each of these health care companies has a global business, and all were benefiting from the increase in demand for new products worldwide. Q. WHAT OTHER COMPANIES CONTRIBUTED TO PERFORMANCE? C.S. One strong contributor has been the Finnish brewer, Hartwall. This firm has bought and modernized a number of old breweries in the former Soviet Union, greatly increasing the breweries' volume and enabling the plants to improve the quality of their beers, which in turn has helped increase demand. The stock rose by 97% in the first four months of 1998. Another contributor was Tieto, the largest information technology service company in Finland, whose stock rose 67% during the same period. A third company was Raisio of Finland. This company has produced a cholesterol-reducing agent and has entered into a global distribution agreement with a subsidiary of Johnson & Johnson. Other strong stocks included Europolitan Holdings, a Swedish cellular network company, and Scandic Hotels, a hotel chain based in Sweden. Q. WERE THERE ANY DISAPPOINTMENTS? C.S. The Danish banks in general did badly during the period because of fears about the potential impact of proposed changes in Denmark's tax laws. While I had reduced the fund's emphasis in these companies, their performance still hurt the fund. Norwegian stocks, especially banking stocks, underperformed the other Nordic markets. Investors have been concerned about the possibility that growth in Norway may overheat, stimulating inflation and causing interest rates to rise. Q. DO YOU EXPECT THE ADVENT OF A SINGLE CURRENCY, THE EURO, IN MUCH OF EUROPE TO HAVE A MAJOR IMPACT ON STOCKS OF THE NORDIC REGION? C.S. Of the four Nordic countries, only Finland will adopt the single European currency at the outset, although Sweden and Denmark may later. Norway is not a member of the European Monetary Union. However, the single currency is not as important an issue as may first appear. Most of the largest companies will be bought and sold using the Euro currency regardless of where they are based. This will be true, for example, in Sweden, where companies account for more than one half the Nordic index and more than one half the fund's portfolio. Most Swedish companies do a small amount of their business in Sweden. They effectively are global companies domiciled in Sweden. So the movement to the single European currency will not be a cause for concern to the Swedish stock market. The larger issue of the emergence of a single market across Europe - a Pan-European market - is having a more profound impact. Companies are restructuring themselves to be European in orientation. Q. TURNING TO YOU TRYGVE, WHAT IS YOUR OUTLOOK? A. The stock-picking environment remains good in the Nordic region, despite relatively high stock prices. In general, the European economies have been recovering enough to offset the effects of the Asian economic crisis. One of the effects of the European Economic Union will be the convergence of interest rates in different countries to be closer to each other, which could lead to further rate reductions in Denmark. Norway, on the other hand, will probably see increasing rates due to rising inflationary pressures. Because of a tight labor market, recent collective bargaining contracts in Norway have been worse than business observers expected, with average wage increases over the next two years in the 4.5% to 5.5% range. For labor-intensive industries, these contracts will have a big impact on their cost bases. For these reasons, I expect the portfolio will continue to de-emphasize Norway and instead be overweighted in Finland, where the prospects are more favorable. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. TRYGVE TORAASEN ON HIS INVESTMENT APPROACH: "I emphasize a bottom-up, stock-picking approach similar to that of the previous manager, Colin Stone, with whom I have worked closely. This is important, given the universe of stocks in the Nordic region which has a large base of cyclical, commodity companies, with a fair representation of high technology companies as well. "I use Fidelity's significant research resources to find stocks that are undervalued on any investment parameter. I am not strictly a value manager or a growth manager. I will look for attractive opportunities based on corporate turnarounds, restructurings and gaps in valuations when compared to stock prices of similar companies in other countries. These types of companies have dominated the fund's portfolio. I will be attracted to the stock of a company when Fidelity's research staff and I believe its prospects are more favorable than its current stock price implies." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of issuers in Denmark, Finland, Norway and Sweden FUND NUMBER: 342 TRADING SYMBOL: FNORX START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $123 million MANAGER: Trygve Toraasen, since June 1, 1998; research analyst since 1994; associate portfolio manager, Fidelity Nordic Fund, 1997-June 1998; joined Fidelity in 1994 (checkmark) NORDIC INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 5.9% ROW: 1, COL: 1, VALUE: 11.3 ROW: 1, COL: 2, VALUE: 26.4 ROW: 1, COL: 3, VALUE: 4.2 ROW: 1, COL: 4, VALUE: 52.2 ROW: 1, COL: 5, VALUE: 5.9 DENMARK 11.3% SWEDEN 52.2% FINLAND 26.4% NORWAY 4.2% AS OF OCTOBER 31, 1997 UNITED STATES 6.5% ROW: 1, COL: 1, VALUE: 11.7 ROW: 1, COL: 2, VALUE: 24.2 ROW: 1, COL: 3, VALUE: 4.5 ROW: 1, COL: 4, VALUE: 1.1 ROW: 1, COL: 5, VALUE: 52.0 ROW: 1, COL: 6, VALUE: 6.5 DENMARK 11.7% FINLAND 24.2% SWEDEN 53.0% NORWAY 4.5% NETHERLANDS 0.1% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 94.1 94.5 SHORT-TERM INVESTMENTS 5.9 5.5 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO ERICSSON (L.M.) TELEPHONE CO. CLASS B 9.5 9.3 (SWEDEN, COMMUNICATIONS EQUIPMENT) NOKIA CORP. AB, SERIES A 9.3 8.1 (FINLAND, COMMUNICATIONS EQUIPMENT) ASTRA AB CLASS A FREE SHARES 8.0 6.9 (SWEDEN, DRUGS & PHARMACEUTICALS) ABB AB, SERIES A 5.0 3.2 (SWEDEN, HOLDING COMPANIES) FORENINGSSPARBANKEN AB, SERIES A 3.0 0.0 (SWEDEN, BANKS) UPM-KYMMENE CORP. 2.8 2.5 (FINLAND, PAPER & FOREST PRODUCTS) SVENSKA HANDELSBANKEN 2.7 2.5 (SWEDEN, BANKS) SKANDIA FOERSAEKRINGS AB 2.2 2.0 (SWEDEN, INSURANCE) NORDBANKEN HOLDING AB 2.1 1.7 (SWEDEN, BANKS) VOLVO AB CLASS B 2.1 3.1 (SWEDEN, AUTOS, TIRES & ACCESSORIES) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 21.1 23.4 FINANCE 19.4 17.6 HEALTH 13.0 10.8 BASIC INDUSTRIES 7.8 10.0 DURABLES 5.6 7.5 NONDURABLES 5.4 2.8 MEDIA & LEISURE 5.2 5.4 HOLDING COMPANIES 5.0 4.3 INDUSTRIAL MACHINERY & EQUIPMENT 3.7 2.5 CONSTRUCTION & REAL ESTATE 3.3 5.3 NORDIC INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 94.1% SHARES VALUE (NOTE 1) DENMARK - 11.3% Broendby IF Class B (a) 4,900 $ 436,430 Carlsberg AS Class B 15,600 970,274 Danisco AS 16,200 1,017,049 Den Danske Bank Group AS 11,279 1,366,812 GN Store Nordic Ltd. 20,600 516,805 Incentive AS 10,278 577,736 Jyske Bank AS (Reg.) 3,800 441,073 NKT Holding AS 9,710 765,549 Novo-Nordisk AS Class B 12,900 2,090,609 Radiometer AS Class B 10,500 456,842 Ratin AS Class B 4,920 944,607 Sondagsavisen AS (Reg.) 19,900 929,744 Scanbox Danmark AS Class B (a) 9,170 291,868 Sophus Berendsen AS Class B 4,380 177,139 Syd-Sonderjylland Holding 24,250 1,352,494 Unidanmark AS Class A 17,867 1,499,960 Vestas Wind Systems AS 4,900 211,047 14,046,038 FINLAND - 26.4% Asko Class A 50,590 1,053,185 Cultor OY, Series 1 15,842 935,643 Elcoteq Network Corp. Class A 7,300 98,413 Elcoteq Network Corp. Class A (a)(c) 26,000 350,514 Enso OY Class R 111,250 1,183,511 Hartwall OY AB Class A 56,815 1,761,140 Huhtamaki Ord. 7,569 437,314 KCI (Konecranes International) 23,850 1,137,381 Martela OY Class A 19,500 608,034 Merita Ltd., Series A 214,700 1,433,434 Metsa-Serla Ltd. Class B 114,950 1,191,246 Nokia Corp. AB, Series A 172,680 11,592,238 Nokian Tyres Ltd. 9,000 519,993 Okobank Class A 23,700 428,182 Pohjola Class B 33,601 1,861,244 Rauma OY 41,197 770,744 Raisio Group PLC 5,270 966,618 Sampo Insurance Co. Ltd. 13,000 586,574 Talentum OY Class B 45,750 755,227 Tieto Corp Class B 5,149 944,424 UPM-Kymmene Corp. 114,350 3,429,242 Yit-Yhtymae OY 52,300 767,425 32,811,726 NORWAY - 4.2% A-Pressen AS, Series A 11,500 254,135 Ekornes AS (Reg.) 75,150 754,872 Fokus Bank AS 64,550 544,653 Orkla AS Class A Free shares 5,150 609,737 NCL Holdings AS (a) 370,177 1,779,864 P4 Radio Hele Norge SA 17,000 198,085 Schibsted AS, Series B 59,800 1,137,293 5,278,639 SWEDEN - 52.2% ABB AB, Series A 381,600 6,174,996 Astra AB Class A Free shares 483,133 9,904,862 Assi Doman AB Free shares 27,100 726,804 Biora AB sponsored ADR (a) 39,200 1,229,900 Dahl International AB 29,700 539,958 Electrolux AB 15,830 1,469,596 Ericsson (L.M.) Telephone Co. Class B 228,286 11,741,099 Europolitan Holdings AB 26,650 1,649,389 SHARES VALUE (NOTE 1) Fastighets AB Tornet 47,700 $ 722,671 ForeningsSparbanken AB, Series A 119,650 3,733,470 Granges AB (Reg.) 50,700 921,747 Hemkopskedjan AB, Series B 72,900 991,664 Hennes & Mauritz AB Class B 37,850 1,966,779 Incentive AB Class B 18,450 1,777,058 IBS (International Business Systems) AB Class B Free shares (a) 45,500 701,074 Mandamus AB rights 6/15/98 (a) 109,150 170,292 Mo Och Domsjoe AB Class B 23,150 716,386 Munters AB 105,700 1,192,525 Munters AB (c) 8,300 93,642 NCC AB Class B Free shares 48,300 610,320 Nobel Biocare AB 57,700 751,418 Nordbanken Holding AB 354,550 2,605,775 Skandinaviska Enskilda Banken Class A Free shares 130,400 2,168,962 Skandia Foersaekrings AB 39,950 2,776,452 Scandic Hotels AB 24,000 912,889 Spectra Physics AB, Series A 7,100 136,405 Stora Kopparbergs Bergslags AB Class A Free shares 88,200 1,506,847 Svenska Handelsbanken 73,050 3,306,069 Svedala Industri Free shares 37,990 903,754 TV 4 AB Class A 5,725 110,726 Volvo AB Class B 85,978 2,557,548 64,771,077 TOTAL COMMON STOCKS (Cost $94,541,295) 116,907,480 CASH EQUIVALENTS - 5.9% Taxable Central Cash Fund (b) (Cost $7,293,371) 7,293,371 7,293,371 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $101,834,666) $ 124,200,851 LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $444,156 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $53,266,069 and $22,516,705, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $2,554 for the period. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Basic Industries 7.8% Cash Equivalents 5.9 Construction & Real Estate 3.3 Durables 5.6 Finance 19.4 Health 13.0 Holding Companies 5.0 Industrial Machinery & Equipment 3.7 Media & Leisure 5.2 Nondurables 5.4 Retail & Wholesale 2.4 Services 0.9 Technology 21.1 Utilities 1.3 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $101,860,317. Net unrealized appreciation aggregated $22,340,534, of which $24,345,699 related to appreciated investment securities and $2,005,165 related to depreciated investment securities. NORDIC FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 124,200,851 (COST $101,834,666) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 514,364 (COST $513,378) RECEIVABLE FOR INVESTMENTS SOLD 1,088,776 RECEIVABLE FOR FUND SHARES SOLD 1,101,635 DIVIDENDS RECEIVABLE 571,338 INTEREST RECEIVABLE 46,700 REDEMPTION FEES RECEIVABLE 88 TOTAL ASSETS 127,523,752 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 3,281,701 PAYABLE FOR FUND SHARES REDEEMED 183,482 ACCRUED MANAGEMENT FEE 64,280 OTHER PAYABLES AND 99,800 ACCRUED EXPENSES TOTAL LIABILITIES 3,629,263 NET ASSETS $ 123,894,489 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 98,885,430 UNDISTRIBUTED NET INVESTMENT INCOME 770,405 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 1,871,513 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 22,367,141 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 6,708,941 $ 123,894,489 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($123,894,489 (DIVIDED BY) 6,708,941 SHARES) $18.47 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $18.47) $19.04
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 1,405,008 DIVIDENDS INTEREST 115,615 1,520,623 LESS FOREIGN TAXES WITHHELD (210,207) TOTAL INCOME 1,310,416 EXPENSES MANAGEMENT FEE $ 275,768 TRANSFER AGENT FEES 139,870 ACCOUNTING FEES AND EXPENSES 32,039 NON-INTERESTED TRUSTEES' COMPENSATION 125 CUSTODIAN FEES AND EXPENSES 48,338 REGISTRATION FEES 22,424 AUDIT 15,442 LEGAL 195 REPORTS TO SHAREHOLDERS 6,466 MISCELLANEOUS 67 TOTAL EXPENSES 540,734 NET INVESTMENT INCOME 769,682 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 1,928,074 FOREIGN CURRENCY TRANSACTIONS (7,474) 1,920,600 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 14,321,487 ASSETS AND LIABILITIES IN 836 14,322,323 FOREIGN CURRENCIES NET GAIN (LOSS) 16,242,923 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,012,605 OTHER INFORMATION $ 83,546 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 1,007
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 769,682 $ 460,352 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 1,920,600 6,922,189 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 14,322,323 5,718,128 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 17,012,605 13,100,669 DISTRIBUTIONS TO SHAREHOLDERS (302,313) (148,633) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (5,108,510) (297,267) TOTAL DISTRIBUTIONS (5,410,823) (445,900) SHARE TRANSACTIONS 57,579,205 91,413,026 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 5,325,815 444,929 COST OF SHARES REDEEMED (23,928,667) (62,246,049) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 38,976,353 29,611,906 REDEMPTION FEES 38,614 140,469 TOTAL INCREASE (DECREASE) IN NET ASSETS 50,616,749 42,407,144 NET ASSETS BEGINNING OF PERIOD 73,277,740 30,870,596 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $770,405 AND $436,258, RESPECTIVELY) $ 123,894,489 $ 73,277,740 OTHER INFORMATION SHARES SOLD 3,281,100 6,327,627 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 375,060 33,555 REDEEMED (1,543,471) (4,182,354) NET INCREASE (DECREASE) 2,112,689 2,178,828
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 15.94 $ 12.77 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME E .16 .10 .17 D NET REALIZED AND UNREALIZED GAIN (LOSS) 3.61 3.19 2.57 TOTAL FROM INVESTMENT OPERATIONS 3.77 3.29 2.74 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.07) (.05) - FROM NET REALIZED GAIN (1.18) (.10) - TOTAL DISTRIBUTIONS (1.25) (.15) - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .03 .03 NET ASSET VALUE, END OF PERIOD 18.47 $ 15.94 $ 12.77 TOTAL RETURN B, C 26.07% 26.24% 27.70% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 123,894 $ 73,278 $ 30,871 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.48% A 1.42% 2.00% F RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.11% A .67% 1.52% PORTFOLIO TURNOVER RATE 61% A 74% 35% AVERAGE COMMISSION RATE G $ .0628 $ .0485 $ .0523 A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.16 PER SHARE. E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER G A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
PACIFIC BASIN PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 APRIL 30, 1998 MONTHS YEAR YEARS YEARS FIDELITY PACIFIC BASIN -5.11% -10.00% 0.13% 2.88% FIDELITY PACIFIC BASIN -7.95% -12.70% -2.87% -0.21% (INCL. 3.00% SALES CHARGE) MSCI PACIFIC -8.58% -17.95% -20.17% -27.04% PACIFIC REGION FUNDS AVERAGE -9.11% -23.41% -4.08% 32.59% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International (MSCI) Pacific Index - a market capitalization weighted index of over 400 stocks traded in six Pacific-region markets. To measure how the fund's performance stacked up against its peers, you can compare it to the Pacific region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 53 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 APRIL 30, 1998 YEAR YEARS YEARS FIDELITY PACIFIC BASIN -10.00% 0.03% 0.28% FIDELITY PACIFIC BASIN -12.70% -0.58% -0.02% (INCL. 3.00% SALES CHARGE) MSCI PACIFIC -17.95% -4.41% -3.10% PACIFIC REGION FUNDS AVERAGE -23.41% -0.99% 2.45% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Pacific Basin MS Pacific Index (Net) 00302 MS003 1988/04/30 9700.00 10000.00 1988/05/31 9353.80 9618.36 1988/06/30 8818.75 9291.44 1988/07/31 8648.80 9713.52 1988/08/31 8617.33 8994.52 1988/09/30 8743.22 9341.80 1988/10/31 8806.16 10109.66 1988/11/30 9372.68 10943.99 1988/12/31 9399.24 11006.02 1989/01/31 9576.82 11107.22 1989/02/28 9786.12 11249.15 1989/03/31 9557.80 10891.87 1989/04/30 9805.15 10898.31 1989/05/31 9424.61 10289.35 1989/06/30 8986.99 9830.61 1989/07/31 10058.84 11106.41 1989/08/31 9519.74 10419.28 1989/09/30 10306.18 11056.08 1989/10/31 10008.10 10760.18 1989/11/30 10331.55 11272.42 1989/12/31 10474.70 11284.68 1990/01/31 10118.28 10646.19 1990/02/28 9484.65 9612.98 1990/03/31 8897.22 7881.88 1990/04/30 8798.22 7934.92 1990/05/31 9649.66 9037.14 1990/06/30 9794.86 8673.04 1990/07/31 10124.88 8607.19 1990/08/31 8778.42 7786.11 1990/09/30 7346.15 6565.40 1990/10/31 8507.80 7983.79 1990/11/30 7728.97 7098.46 1990/12/31 7624.18 7400.62 1991/01/31 7771.32 7631.27 1991/02/28 8473.54 8572.02 1991/03/31 8366.54 8105.07 1991/04/30 8727.68 8313.37 1991/05/31 8667.49 8281.18 1991/06/30 8520.36 7740.03 1991/07/31 8627.36 8001.07 1991/08/31 8045.52 7595.21 1991/09/30 8547.11 8192.68 1991/10/31 8794.56 8541.33 1991/11/30 8379.91 7991.84 1991/12/31 8580.55 8237.08 1992/01/31 8359.85 7917.93 1992/02/29 8279.59 7363.37 1992/03/31 7757.94 6663.09 1992/04/30 7677.69 6357.65 1992/05/31 8292.97 6853.51 1992/06/30 8119.09 6314.58 1992/07/31 7757.94 6226.80 1992/08/31 7985.33 7079.84 1992/09/30 7931.82 6917.62 1992/10/31 8025.45 6673.37 1992/11/30 7992.02 6799.23 1992/12/31 7926.87 6721.40 1993/01/31 8007.89 6708.89 1993/02/28 8473.78 7034.17 1993/03/31 9047.70 7883.92 1993/04/30 9965.98 9140.00 1993/05/31 10452.12 9405.90 1993/06/30 9911.96 9251.70 1993/07/31 10438.62 9798.68 1993/08/31 10918.01 10088.50 1993/09/30 10945.02 9711.19 1993/10/31 11802.53 9926.78 1993/11/30 11221.85 8526.18 1993/12/31 12992.82 9120.54 1994/01/31 13345.29 10176.29 1994/02/28 13476.60 10438.63 1994/03/31 12467.58 9862.41 1994/04/30 12813.13 10288.86 1994/05/31 13193.24 10533.62 1994/06/30 13137.95 10878.20 1994/07/31 13110.31 10644.81 1994/08/31 13732.31 10829.82 1994/09/30 13552.62 10558.76 1994/10/31 13794.51 10825.84 1994/11/30 12661.09 10221.73 1994/12/31 12627.32 10290.51 1995/01/31 11457.40 9640.63 1995/02/28 11270.21 9401.87 1995/03/31 11628.99 10123.70 1995/04/30 11761.58 10554.27 1995/05/31 11691.38 10132.11 1995/06/30 11582.19 9702.72 1995/07/31 12338.74 10402.27 1995/08/31 12206.15 10010.44 1995/09/30 12065.76 10103.16 1995/10/31 11605.59 9611.90 1995/11/30 11504.20 10084.49 1995/12/31 11855.17 10576.70 1996/01/31 12034.56 10594.64 1996/02/29 11777.18 10475.09 1996/03/31 12089.16 10796.36 1996/04/30 12728.71 11346.12 1996/05/31 12369.94 10853.76 1996/06/30 12533.73 10856.01 1996/07/31 11894.17 10357.17 1996/08/31 11660.19 10084.50 1996/09/30 12003.36 10413.61 1996/10/31 11426.20 9930.21 1996/11/30 11862.97 10199.84 1996/12/31 11527.47 9669.68 1997/01/31 10813.86 8856.45 1997/02/28 11041.28 9041.55 1997/03/31 10743.29 8710.64 1997/04/30 11088.33 8892.43 1997/05/31 12225.39 9763.08 1997/06/30 12797.84 10368.39 1997/07/31 13127.20 10121.21 1997/08/31 11535.31 9118.00 1997/09/30 11817.62 9083.62 1997/10/31 10515.87 7981.32 1997/11/30 10155.15 7542.59 1997/12/31 9786.91 7211.77 1998/01/31 10251.04 7603.30 1998/02/28 10275.05 7876.72 1998/03/31 9786.91 7443.18 1998/04/30 9978.96 7296.33 IMATRL PRASUN SHR__CHT 19980430 19980506 115138 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Pacific Basin Fund on April 30, 1988, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have been $9,979 - a 0.21% decrease on the initial investment. For comparison, look at how the Morgan Stanley Capital International Pacific Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have been $7,296 - a 27.04% decrease. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) PACIFIC BASIN FUND TALK: THE MANAGER'S OVERVIEW An interview with Shigeki Makino, Portfolio Manager of Fidelity Pacific Basin Fund Q. HOW DID THE FUND PERFORM, SHIGEKI? A. For the six months that ended April 30, 1998, the fund had a total return of -5.11%. During the same period, the Morgan Stanley Capital International Pacific Index had a return of -8.58%, while the Pacific region funds average tracked by Lipper Analytical Services returned - -9.11%. For the 12 months that ended April 30, 1998, the fund had a total return of -10.00%. Over that same period, the index and the average had returns of -17.95% and -23.41%, respectively. Q. ALTHOUGH THE FUND'S RETURNS WERE NEGATIVE, IT PERFORMED BETTER THAN THE INDEX AND THE AVERAGE. WHY WAS THAT? A. Negative returns - in U.S. dollar terms - were the norm for most Pacific Basin funds over the period, as the region struggled to come to grips with slowing economies, sharply depreciated currencies, excess production capacity, the shaky balance sheets of many firms and the diminished flow of investment capital from other parts of the world. However, relative to the index, the fund was helped by investing more heavily in Australia, and by having a lighter position in Japanese stocks - even though Japan remained the fund's largest country weighting at 70.9% at the end of the period. A greater emphasis on Australia also helped the fund's performance relative to the Lipper average, as did having a lower exposure to non-Japanese Asian stocks. In addition to its geographical allocations, the fund also was helped by strong stock selection. Q. CAN YOU DESCRIBE THE INVESTMENT ENVIRONMENT IN THE PACIFIC BASIN DURING THE PAST SIX MONTHS? A. Schizophrenic is a good word to describe it. The last two months of 1997 were characterized by rapidly falling stock prices and the depreciation of many Pacific Basin currencies relative to the U.S. dollar. In Japan, which has one of the key economies in the region, the failure of Yamaichi Securities and several other prominent financial services firms raised the possibility in investors' minds of widespread bankruptcies. The share prices of many Japanese companies fell as they began to reflect that possibility. Early in 1998, the markets entered a radically different phase. The Japanese government, fearing a "domino effect" of failing companies against the backdrop of an already stagnant economy, steadied the markets with promises to pass legislation to help stimulate the economy, and with assurances that banks would not be allowed to fail. From mid-January through mid-March, most Pacific Basin stock markets rallied strongly, regaining much of the ground they'd lost near the end of 1997. However, the Japanese government failed to follow through on its promises with any meaningful reform measures. The markets responded by plunging again in April, reflecting investors' loss of confidence. Q. CAN YOU EXPLAIN YOUR STRATEGY IN MORE DETAIL? A. Australia was one of the few Pacific Basin countries offering a healthy economy and well-managed companies with stocks selling at reasonable price-to-earnings ratios. Japan was also important to my overall strategy over the period. The economy in Japan was extremely sluggish and showed no signs of recovering any time soon, so it was important to be selective about investments there. In this environment, I looked for companies with strong business franchises, shareholder-friendly managements, healthy cash flows and high returns on capital. Many of the companies that fit this description derived much of their revenues from exports. These companies can still do well when the yen declines relative to the U.S. dollar, as it did over the period. Depreciation of the yen has the effect of increasing yen-denominated sales even when U.S. dollar-denominated sales remain flat. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A. Aiwa is a Japanese stock that helped the fund's performance. The company, which is extremely competitive in the mini-component stereo market, benefited from having production facilities in Malaysia and Indonesia - two countries whose currencies depreciated sharply in the past year against both the Japanese yen and the U.S. dollar. When the Malaysian ringgit and the Indonesian rupiah declined against the yen, Aiwa experienced lower costs for Malaysian and Indonesian labor and other expenses. On the other hand, much of the company's revenue came from the U.S. and Europe. Therefore, the currency markets handed Aiwa a double-barreled advantage. The company's revenue stream benefited not only from the company's increased market share but also from the yen's lower value in U.S. dollar terms, while its costs fell substantially because of the decline of the ringgit and rupiah against the yen. And because Aiwa shares had been selling at a very reasonable valuation, the stock's price rose sharply as the implications of this scenario became clear to investors. Q. WHAT OTHER STOCKS HELPED THE FUND'S PERFORMANCE? A. National Australia Bank is representative of the fund's increased emphasis on Australian equities. The stock performed well because it was inexpensively valued relative to its global peers and saw reasonable growth in assets and earnings. There was also some favorable spillover effect from the consolidation taking place within the Australian banking industry. Johnson Electric - another helpful holding - is one of two major Pacific Basin players in the micromotor market, which mainly serves the toy, home appliance and auto industries. The company enjoyed higher profits resulting from more carefully planned capacity expansion and pricing. Investors also responded favorably to evidence that the company's management is trying to increase shareholder returns. Johnson recently bought back one of its convertible bonds, which is positive for shareholders because it lowers the company's debt and reduces the potential number of outstanding shares, thereby making less likely a dilution of earnings per share. Q. WHAT STOCKS HURT PERFORMANCE? A. Komatsu was one of the first Japanese companies to consistently make business decisions based on the goal of maximizing shareholder returns. Unfortunately, the niche markets that the company serves - construction equipment, silicon wafers and electronic equipment - have all been sluggish lately, and Komatsu stock struggled as a result. Another stock that hurt the fund's performance was Sydney Harbour Casino Holdings, an Australian stock. The company built a new casino to take advantage of existing demand for gambling and in anticipation of the Olympic games scheduled to be held in Sydney in the year 2000. However, early operations were not as profitable as anticipated, a tax break expected to benefit high-net-worth gamblers did not materialize and the stock experienced weakness in sympathy with the shares of a casino in Melbourne that suffered from management problems. Q. WHAT'S YOUR OUTLOOK, SHIGEKI? A. The stability of the Pacific Basin depends to a great extent on the economies of Japan and China. The Chinese economy is growing, albeit more slowly than it was a year or two ago. Fortunately, China has a large domestic economy that makes it more resistant to the stagnation affecting many other Pacific Basin economies. Japan is still mired in a bad recession. Production, private consumption, capital spending and other economic indicators are all very weak. There are some positive signs, however. Increasingly, Japanese companies are adopting more rational ways of allocating their capital. For example, many companies have announced stock buybacks, a tactic that helps existing shareholders by increasing earnings per share. I am also seeing more firms divesting themselves of unprofitable business lines. When making investment decisions for the fund, I look at these and many other indicators to determine management's commitment to making fundamentally sound business decisions. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. SHIGEKI MAKINO ON THE CHALLENGES FACING THE PACIFIC BASIN ECONOMIES: "Many Pacific Basin economies, including those of Malaysia, South Korea, Indonesia, Thailand, the Philippines and, most importantly, Japan, have inefficiencies and structural problems that need immediate attention. These problems include production overcapacity in many industries, bad debt in the banking sector, trade barriers that encourage inefficiency and weak balance sheets on the part of many firms. These problems are, in part, a byproduct of the desire in many of these cultures to protect individuals, organizations and even entire industries from failure - apparently, even at the expense of those industries' long-term economic well-being. "In Japan, for example, many industries - particularly the financial services sector - are still riddled with many companies that can be competitive only with infusions of cash and other help from the government. The convoy system - a method of transferring resources from healthy companies to struggling ones - is another mechanism for bailing out weak firms. The trouble with these transfers is that they subsidize bad business decisions and allow companies to continue their unprofitable ways without penalty. At the same time, the opportunity cost is tremendous because resources are siphoned away from more profitable endeavors. "There are signs of progress, however. The International Monetary Fund (IMF) is working closely with the South Korean and Thai governments to remedy some of these problems. The IMF is encouraging these countries to pass bankruptcy and foreclosure laws that will make it easier to put marginal companies out of business. Ultimately, this will lead to a more rational allocation of capital. "In Japan, the government had pledged to let struggling companies fail rather than continue to prop them up with subsidies. However, the events of the last quarter of 1997 - - which included the failure of several prominent finance companies, plunging equity markets and a further weakening of the yen against the U.S. dollar - seem to have weakened the Japanese government's resolve. A reversal of policy has taken place, and ailing firms are once again being bailed out. "When the governments of these countries step back and allow companies to succeed or fail on their own merits, those companies will out of necessity become more competitive and responsive to shareholders' concerns, and they will be able to provide the return on capital demanded by global investors. These firms need to avail themselves of the techniques employed so effectively by companies that serve as models of competition around the globe. Examples of these techniques include cutting costs, shrinking debt, buying back stock, raising dividends and using mergers and acquisitions to bolster core competencies. Certainly, many companies whose stocks are owned by the fund are models of competition, and I will try to position the fund to benefit from other opportunities that arise as the region hones its competitive edge." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Pacific Basin issuers FUND NUMBER: 302 TRADING SYMBOL: FPBFX START DATE: October 1, 1986 SIZE: as of April 30, 1998, more than $214 million MANAGER: Shigeki Makino, since 1996; manager, Fidelity Japan Fund, since 1994; joined Fidelity in 1990 (checkmark) PACIFIC BASIN INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 4.6% UNITED KINGDOM 1.1% SINGAPORE 1.8% ROW: 1, COL: 1, VALUE: 4.6 ROW: 1, COL: 2, VALUE: 2.1 ROW: 1, COL: 3, VALUE: 2.8 ROW: 1, COL: 4, VALUE: 1.0 ROW: 1, COL: 5, VALUE: 3.7 ROW: 1, COL: 6, VALUE: 67.40000000000001 ROW: 1, COL: 7, VALUE: 5.9 ROW: 1, COL: 8, VALUE: 12.5 AUSTRALIA 12.5% OTHER 0.5% MALAYSIA 2.7% HONG KONG 5.9% JAPAN 70.9% AS OF OCTOBER 31, 1997 UNITED STATES 6.6% SINGAPORE 1.9% AUSTRALIA 9.9% ROW: 1, COL: 1, VALUE: 6.6 ROW: 1, COL: 2, VALUE: 1.9 ROW: 1, COL: 3, VALUE: 2.2 ROW: 1, COL: 4, VALUE: 2.2 ROW: 1, COL: 5, VALUE: 71.40000000000001 ROW: 1, COL: 6, VALUE: 5.8 ROW: 1, COL: 7, VALUE: 9.9 OTHER 2.2% HONG KONG 5.8% MALAYSIA 2.2% JAPAN 71.4% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS AND EQUITY FUTURES 94.9 92.9 BONDS 0.5 0.5 SHORT-TERM INVESTMENTS 4.6 6.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO TOYOTA MOTOR CORP. 2.5 2.7 (JAPAN, AUTOS, TIRES, & ACCESSORIES) CANON, INC. 2.2 1.8 (JAPAN, COMPUTERS & OTHER EQUIPMENT) HONDA MOTOR CO. LTD. 2.0 1.9 (JAPAN, AUTOS, TIRES, & ACCESSORIES) NATIONAL AUSTRALIA BANK LTD. 2.0 2.0 (AUSTRALIA, BANKS) MATUSHITA ELECTRIC INDUSTRIAL CO. LTD. 1.7 2.4 (JAPAN, CONSUMER ELECTRONICS) MINEBEA CO. LTD. 1.7 1.4 (JAPAN, ELECTRONICS) ORIX CORP. 1.6 1.7 (JAPAN, LEASING & RENTAL) SANKYO CO. LTD. 1.6 1.4 (JAPAN, CONSUMER DURABLES) ROHM CO. LTD. 1.6 1.8 (JAPAN, ELECTRONICS) SONY CORP. 1.6 1.4 (JAPAN, CONSUMER ELECTRONICS) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 21.9 19.8 FINANCE 15.6 17.1 DURABLES 12.7 12.3 INDUSTRIAL MACHINERY & EQUIPMENT 8.9 8.8 MEDIA & LEISURE 7.0 6.6 HEALTH 5.9 6.9 BASIC INDUSTRIES 4.7 2.6 SERVICES 4.3 3.6 RETAIL & WHOLESALE 3.5 2.3 CONSTRUCTION & REAL ESTATE 3.3 3.7 PACIFIC BASIN INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) AUSTRALIA - 12.1% Australia & New Zealand Banking Group Ltd. 287,327 $ 1,998,760 Australian Gas Light Co. 61,000 452,451 Brambles Industries Ltd. 79,647 1,636,341 Broken Hill Proprietary Co. Ltd. (The) 111,200 1,084,117 David Jones Ltd. 530,590 603,500 Goodman Fielder Ltd. Ord. 681,037 1,053,483 Harvey Norman Holdings Ltd. 206,394 1,047,679 Howard Smith 134,000 947,749 Leighton Holdings Ltd. 283,000 1,076,025 Macquarie Bank Ltd. 118,300 1,107,203 National Australia Bank Ltd. (a) 303,615 4,301,894 Normandy Mining Ltd. 743,035 825,820 Pioneer International Ltd. 346,200 985,556 Publishing & Broadcasting Ltd. 255,600 1,217,713 QNI Ltd. 1,584,200 926,686 Rio Tinto Ltd. 76,600 1,058,554 Tabcorp Holdings Ltd. 208,000 1,128,833 Westfield Holdings Ltd. 225,000 1,126,038 Westpac Banking Corp. 156,300 1,046,348 Woodside Petroleum Ltd. 280,161 1,826,369 Woolworths Ltd. 183,000 628,008 26,079,127 HONG KONG - 5.9% Cheung Kong Holdings Ltd. 118,000 784,281 Four Seas Mercantile Holdings Ltd. 1,702,000 757,811 Hong Kong & China Gas Co. Ltd. 1,486,496 2,023,944 Hong Kong & China Gas Co. Ltd. warrants 9/30/99 (a) 67,568 - Hutchison Whampoa Ltd. Ord. 102,000 630,548 JCG Holdings Ltd. 1,812,000 830,174 Johnson Electric Holdings Ltd. 600,000 2,032,652 Li & Fung Ltd. 400,000 671,098 National Mutual Asia Ltd. 830,000 664,129 South China Morning Post Holdings 2,368,000 1,421,075 Sun Hung Kai Properties Ltd. 140,000 831,129 Television Broadcast Ltd. Ord. 407,000 1,040,021 Vtech Holdings Ltd. 214,000 751,216 Yue Yuen Industrial Holdings Ltd. 135,000 260,470 12,698,548 JAPAN - 70.4% Acom Co. Ltd. 55,400 2,915,460 Aderans Co. Ltd. 50,000 1,178,242 Aiful Corp. (a) 6,000 395,709 Aiwa Co. Ltd. 110,000 3,271,221 Akita Bank Ltd. 216,000 944,822 Amway Japan Ltd. 40,000 554,113 Asahi Chemical Industry Co. Ltd. 170,000 593,864 Bank of Tokyo-Mitsubishi Ltd. 100,000 1,233,954 Banyu Pharmaceutical Co. Ltd. 130,000 1,673,631 Benesse Corp. 43,000 1,385,582 Bridgestone Corp. 125,000 2,842,085 Canon Chemicals, Inc. 30,000 334,274 Canon, Inc. 200,000 4,712,968 Charle Co. Ltd. 39,000 325,918 Citizen Watch Co. Ltd. Ord. 180,000 1,206,098 Credit Saison Co. Ltd. 60,000 1,296,443 Daiwa House Industry Co. Ltd. 160,000 1,288,914 Daitec Co. Ltd. 42,700 691,173 Denso Corp. 100,000 1,712,780 Fuji Bank Ltd. 150,000 841,333 SHARES VALUE (NOTE 1) Fuji Heavy Industries Ltd. 100,000 $ 446,452 Fuji Photo Film Co. Ltd. 70,000 2,482,213 Fujitsu Ltd. 240,000 2,791,643 Fuji Machine Manufacturing Co. Ltd. Ord. 80,000 2,276,680 Futaba Corp. 22,000 877,847 Glory Ltd. 40,000 668,549 Heiwa Corp. 60,000 630,152 Hirose Electric Co. Ltd. 50,000 2,518,351 Hitachi Ltd. 415,000 2,965,067 Hitachi Maxell Ltd. 100,000 1,897,233 Honda Motor Co. Ltd. 120,000 4,336,533 Hoya Corp. 90,000 2,967,815 Ito-Yokado Co. Ltd. 40,000 2,062,865 Japan Aviation Electronics Industries 100,000 368,906 KOA 80,000 789,008 Komatsu Ltd. Ord. 400,000 1,806,889 Konami Industry Co. Ltd. 63,100 1,391,929 Mabuchi Motor Co. 30,000 1,730,096 Matsushita Electric Industrial Co. Ltd. 230,000 3,670,996 Matsumotokiyoshi Co. Ltd. 15,000 516,093 Meitec Corp. 40,000 1,309,994 Minebea Co. Ltd. 327,000 3,643,591 Minolta Camera Co. Ltd. 220,000 1,424,431 Mirai Industry Co. Ltd. 63,000 637,945 Mitsubishi Electric Co. Ord. 500,000 1,279,880 Misumi Corp. 30,000 528,515 NGK Insulators Ltd. 250,000 2,196,499 Nintendo Co. Ltd. Ord. 18,000 1,645,172 Nippon Oil Co. Ltd. 350,000 1,177,866 Nippon Telegraph & Telephone Corp. Ord. 165 1,440,994 Nitto Denko Corp. 110,000 1,672,878 Nidec Corp. 30,000 1,603,614 Nomura Securities Co. Ltd. 205,000 2,492,565 Nichicon Corp. 121,000 1,311,801 Okumura Gumi 150,000 553,360 Omron Corp. 200,000 3,124,412 Orix Corp. 50,200 3,458,159 Nippon System Development Co. 15,000 372,671 Nichiei Co. Ltd. 29,700 2,303,106 Paris Miki, Inc. 35,200 564,472 Riso Kagaku Corp. 40,000 2,080,934 Rohm Co. Ltd. 30,000 3,374,365 Sakura Bank Ltd. 350,000 1,198,946 Sankyo Co. Ltd. 140,000 3,457,180 Sekisui Chemical Co. Ltd. 150,000 821,005 Senshukai Co. Ltd. 80,000 394,504 Sharp Corp. 100,000 782,985 Sankyo Co. Ltd. (Gunma) 55,000 877,847 Shimano, Inc. 130,000 2,867,683 Shin-Etsu Chemical Co. Ltd. 120,000 2,330,886 Sony Corp. 39,500 3,355,663 Shohkoh Fund & Co. Ltd. 6,000 1,901,750 Sony Music Entertainment Japan, Inc. 43,500 1,696,443 Sumitomo Bakelite Co. Ltd. 200,000 1,382,270 Sumitomo Special Metals Co. 25,000 559,006 Sumitomo Metal Industries Ltd. 625,000 1,030,491 TDK Corp. 36,000 2,835,008 Takeda Chemical Industries Ltd. 115,000 3,272,727 Takefuji Corp. 50,000 2,616,224 Takefuji Corp. (c) 20,000 1,046,490 Terumo Corp. 100,000 1,459,063 THK Co. Ltd. 151,000 1,443,779 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) JAPAN - CONTINUED Toppan Forms Co. Ltd. 60,000 $ 718,238 Toyota Motor Corp. 210,000 5,454,545 Tokyo Electron Ltd. 40,000 1,565,970 Tokyo Seimitsu Co. Ltd. 40,000 1,171,466 Uni Charm Corp. Ord. 60,000 2,258,611 Wako Electric Co. Ltd. 60,000 632,411 151,922,316 MALAYSIA - 2.7% Amway Holding BHD 518,000 1,020,040 Berjaya Sports Toto BHD 247,000 585,653 C.I. Holdings BHD 85,000 61,715 Malaysia International Shipping BHD (For. Reg.) 570,000 992,632 Oriental Holdings BHD 182,720 381,840 RJ Reynolds BHD 31,000 49,417 Resorts World BHD 500,000 964,501 Rothmans of Pall Mall Malaysia BHD 72,000 593,168 Petronas Gas BHD 200,000 482,251 Tanjong PLC 310,000 705,961 5,837,178 NEW ZEALAND - 0.2% Telecom Corp. of New Zealand (installment receipts) (d) 193,800 518,340 PHILIPPINES - 0.2% Oriental Petroleum & Mineral Corp. Class B (a) 7,771,657 1,255 QueenBee Resources Corp. warrants 3/25/03 (a) 976,000 442,534 443,789 SINGAPORE - 1.8% City Developments Ltd. 120,000 519,103 Clipsal Industries Ltd. 128,000 184,320 Datacraft Asia Ltd. 386,000 1,296,960 Elec & Eltek International Co. Ltd. 160,700 932,060 GP Batteries International Ltd. 112,000 309,795 Singapore Press Holdings 44,660 493,559 Want Want Holdings Ltd. 109,400 131,280 3,867,077 TAIWAN - 0.1% Taiwan Semiconductor Manufacturing Co. sponsored ADR 10,800 265,275 UNITED KINGDOM - 1.1% HSBC Holdings PLC 84,013 2,470,493 TOTAL COMMON STOCKS (Cost $201,360,355) 204,102,143 NONCONVERTIBLE PREFERRED STOCKS - 0.4% AUSTRALIA - 0.4% Sydney Harbour Casino Holdings Ltd. (a) (Cost $1,862,607) 1,219,400 863,878 CONVERTIBLE BONDS - 0.5% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) JAPAN - 0.5% MBL International Finance of Bermuda 3%, 11/30/02 (Cost $1,126,575) Aa2 $ 1,080,000 $ 1,104,300 CASH EQUIVALENTS - 4.6% SHARES Taxable Central Cash Fund (b) (Cost $9,828,217) 9,828,217 9,828,217 TOTAL INVESTMENTS IN SECURITIES - 100% (Cost $214,177,754) $ 215,898,538 CURRENCY ABBREVIATIONS NZD - New Zealand dollar LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,046,490 or 0.5% of net assets. 4. Purchased on an installment basis. Market value reflects only those payments made through 3/31/98. The remaining installment aggregating NZD 804,270 is due 3/31/99 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $66,507,445 and $70,676,935 respectively. The market value of futures contracts opened and closed during the period amounted to $2,259,519 and $4,441,389, respectively. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Basic Industries 4.7% Cash Equivalents 4.6 Construction & Real Estate 3.3 Durables 12.7 Energy 1.6 Finance 15.6 Health 5.9 Industrial Machinery & Equipment 8.9 Media & Leisure 7.0 Nondurables 1.9 Precious Metals 0.4 Retail & Wholesale 3.5 Services 4.3 Technology 21.9 Transportation 1.7 Utilities 2.0 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $214,207,461. Net unrealized appreciation aggregated $1,691,077, of which $30,204,390 related to appreciated investment securities and $28,513,313 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $62,709,000 of which $10,408,000, $17,259,000, and $35,042,000 will expire on October 31, 2003, 2004 and 2005 respectively. PACIFIC BASIN FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 215,898,538 (COST $214,177,754) - SEE ACCOMPANYING SCHEDULE CASH 1,009 RECEIVABLE FOR INVESTMENTS SOLD 23,732 RECEIVABLE FOR FUND SHARES SOLD 397,605 DIVIDENDS RECEIVABLE 601,796 INTEREST RECEIVABLE 62,245 REDEMPTION FEES RECEIVABLE 47 TOTAL ASSETS 216,984,972 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 1,542,529 PAYABLE FOR FUND SHARES REDEEMED 625,720 ACCRUED MANAGEMENT FEE 203,564 OTHER PAYABLES AND 161,045 ACCRUED EXPENSES TOTAL LIABILITIES 2,532,858 NET ASSETS $ 214,452,114 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 296,853,724 DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (4,851,201) ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (79,256,395) NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,705,986 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 17,196,297 $ 214,452,114 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($214,452,114 (DIVIDED BY) 17,196,297 SHARES) $12.47 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $12.47) $12.86
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 1,468,870 DIVIDENDS INTEREST 377,252 1,846,122 LESS FOREIGN TAXES WITHHELD (130,389) TOTAL INCOME 1,715,733 EXPENSES MANAGEMENT FEE $ 814,991 BASIC FEE PERFORMANCE ADJUSTMENT 366,203 TRANSFER AGENT FEES 512,435 ACCOUNTING FEES AND EXPENSES 84,505 CUSTODIAN FEES AND EXPENSES 82,654 AUDIT 21,141 LEGAL 681 MISCELLANEOUS 1,594 TOTAL EXPENSES BEFORE REDUCTIONS 1,884,204 EXPENSE REDUCTIONS (3,701) 1,880,503 NET INVESTMENT INCOME (LOSS) (164,770) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (15,999,373) FOREIGN CURRENCY TRANSACTIONS (190,183) FUTURES CONTRACTS (329,823) (16,519,379) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 3,814,362 ASSETS AND LIABILITIES IN (11,116) FOREIGN CURRENCIES FUTURES CONTRACTS 296,343 4,099,589 NET GAIN (LOSS) (12,419,790) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (12,584,560) OTHER INFORMATION $ 89,806 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 30 DEFERRED SALES CHARGES $ 9,997 WITHHELD BY FDC EXPENSE REDUCTIONS $ 793 DIRECTED BROKERAGE ARRANGEMENTS TRANSFER AGENT CREDITS 2,908 $ 3,701
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ (164,770) $ (123,748) NET INVESTMENT INCOME (LOSS) NET REALIZED GAIN (LOSS) (16,519,379) (32,319,686) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 4,099,589 9,562,140 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (12,584,560) (22,881,294) DISTRIBUTIONS TO SHAREHOLDERS - (363,575) FROM NET INVESTMENT INCOME IN EXCESS OF NET INVESTMENT INCOME (4,350,839) (2,160,117) TOTAL DISTRIBUTIONS (4,350,839) (2,523,692) SHARE TRANSACTIONS 38,905,012 95,487,816 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 4,301,574 2,485,317 COST OF SHARES REDEEMED (51,509,933) (405,452,612) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (8,303,347) (307,479,479) REDEMPTION FEES 173,434 252,002 TOTAL INCREASE (DECREASE) IN NET ASSETS (25,065,312) (332,632,463) NET ASSETS BEGINNING OF PERIOD 239,517,426 572,149,889 END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF $4,851,201 AND $335,592, $ 214,452,114 $ 239,517,426 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,086,573 6,377,029 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 352,299 168,725 REDEEMED (4,109,824) (27,740,166) NET INCREASE (DECREASE) (670,952) (21,194,412)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 30, 1998 SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 13.41 $ 14.65 $ 14.88 $ 19.96 $ 17.48 $ 12.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME (LOSS) (.01) D (.01) D .05 D .07 D .10 .20 NET REALIZED AND UNREALIZED GAIN (LOSS) (.69) (1.16) (.29) (3.12) 2.78 5.39 TOTAL FROM INVESTMENT OPERATIONS (.70) (1.17) (.24) (3.05) 2.88 5.59 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME - (.01) - - (.01) (.11) IN EXCESS OF NET INVESTMENT INCOME (.25) (.07) - (.02) (.11) - FROM NET REALIZED GAIN - - - (2.02) (.28) - TOTAL DISTRIBUTIONS (.25) (.08) - (2.04) (.40) (.11) REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .01 .01 .01 - - NET ASSET VALUE, END OF PERIOD $ 12.47 $ 13.41 $ 14.65 $ 14.88 $ 19.96 $ 17.48 TOTAL RETURN B, C (5.11)% (7.97)% (1.55)% (15.87)% 16.88% 47.06% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 214,452 $ 239,517 $ 572,150 $ 317,635 $ 553,532 $ 493,533 RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.74% A 1.32% 1.26% 1.32% F 1.54% 1.59% RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.73% A, G 1.31% G 1.24% G 1.32% 1.54% 1.59% RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (.15)% A (.04)% .30% .44% .04% .15% PORTFOLIO TURNOVER RATE 64% A 42% 85% 65% 88% 77% AVERAGE COMMISSION RATE E $ .0137 $ .0204 $ .0151 A ANNUALIZED. B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
SOUTHEAST ASIA PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF APRIL 30, 1998 MONTHS YEAR YEARS FUND FIDELITY SOUTHEAST ASIA -5.39% -35.00% -3.68% -4.16% FIDELITY SOUTHEAST ASIA -8.23% -36.95% -6.57% -7.04% (INCL. 3.00% SALES CHARGE) MSCI FAR EAST EX-JAPAN FREE -11.87% -41.50% -7.21% -4.10% PACIFIC EX-JAPAN -10.92% -34.79% -13.65% N/A FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on April 19, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Morgan Stanley Capital International AC Far East ex-Japan Free Index - a market capitalization weighted index of over 450 stocks traded in eight Asian markets, excluding Japan. To measure how the fund's performance stacked up against its peers, you can compare it to the Pacific ex-Japan funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 82 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF APRIL 30, 1998 YEAR YEARS FUND FIDELITY SOUTHEAST ASIA -35.00% -0.75% -0.84% FIDELITY SOUTHEAST ASIA -36.95% -1.35% -1.44% (INCL. 3.00% SALES CHARGE) MSCI FAR EAST EX-JAPAN FREE -41.50% -1.49% -0.83% PACIFIC EX-JAPAN -34.79% -3.00% N/A FUNDS AVERAGE AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Southeast Asia MS FarEast x-JPN Fr Gross 00351 MS008 1993/04/19 9700.00 10000.00 1993/04/30 9651.50 10334.89 1993/05/31 10078.30 10929.98 1993/06/30 9835.80 10642.82 1993/07/31 9826.10 10715.96 1993/08/31 10543.90 11612.63 1993/09/30 10873.70 11974.11 1993/10/31 12842.80 14179.62 1993/11/30 13240.50 14084.20 1993/12/31 15992.99 17508.06 1994/01/31 14696.78 16312.13 1994/02/28 14004.83 15375.29 1994/03/31 12221.33 13702.83 1994/04/30 12533.20 14348.37 1994/05/31 13069.22 14960.14 1994/06/30 12299.30 14295.10 1994/07/31 12952.27 15093.47 1994/08/31 14141.27 16322.75 1994/09/30 14131.52 16059.95 1994/10/31 14238.73 16372.12 1994/11/30 12845.07 14812.82 1994/12/31 12513.71 14446.91 1995/01/31 11198.01 12897.43 1995/02/28 12162.86 14200.92 1995/03/31 12318.79 14269.05 1995/04/30 12309.04 14134.01 1995/05/31 13712.45 15856.11 1995/06/30 13702.71 15617.68 1995/07/31 14053.56 15864.27 1995/08/31 13507.79 15109.47 1995/09/30 13683.21 15371.66 1995/10/31 13527.28 15138.13 1995/11/30 13293.38 14979.13 1995/12/31 14038.25 15724.49 1996/01/31 15771.98 17165.65 1996/02/29 15425.24 17106.70 1996/03/31 15296.45 17244.40 1996/04/30 15623.38 17726.96 1996/05/31 15682.82 17554.45 1996/06/30 15237.00 17200.74 1996/07/31 14038.25 15961.51 1996/08/31 14672.30 16537.82 1996/09/30 15147.84 16955.48 1996/10/31 14553.42 16635.18 1996/11/30 15603.56 17587.62 1996/12/31 15464.51 17475.63 1997/01/31 15454.22 17729.59 1997/02/28 15690.87 17795.50 1997/03/31 14620.81 16822.86 1997/04/30 14301.84 16393.53 1997/05/31 15124.97 17225.98 1997/06/30 15618.85 17686.50 1997/07/31 16123.01 17772.64 1997/08/31 14013.75 14500.35 1997/09/30 13231.78 14391.39 1997/10/31 9826.09 10880.61 1997/11/30 9754.06 10188.55 1997/12/31 9451.16 9732.57 1998/01/31 8882.44 8912.96 1998/02/28 10226.69 10957.88 1998/03/31 10195.67 10690.41 1998/04/30 9296.05 9589.59 IMATRL PRASUN SHR__CHT 19980430 19980506 115545 R00000000000064 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Southeast Asia Fund on April 19, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have been $9,296 - a 7.04% decrease on the initial investment. For comparison, look at how the Morgan Stanley Capital International AC Far East ex-Japan Free Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have been $9,590 - a 4.10% decrease. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) SOUTHEAST ASIA FUND TALK: THE MANAGER'S OVERVIEW An interview with Allan Liu, Portfolio Manager of Fidelity Southeast Asia Fund Q. HOW DID THE FUND PERFORM, ALLAN? A. For the six months that ended April 30, 1998, the fund's return was - -5.39%. During the same period, the Morgan Stanley Capital International (MSCI) Combined Far East Ex-Japan Free Index had a return of -11.87%, while the Pacific ex-Japan funds average tracked by Lipper Analytical Services returned -10.92%. For the 12 months that ended April 30, 1998, the fund's return was -35.00%. Over that same period, the index and the average had returns of -41.50% and -34.79%, respectively. Q. CAN YOU SUMMARIZE THE INVESTMENT CLIMATE OVER THE PERIOD? A. Both the equity markets in Southeast Asia and the region's currencies were extremely volatile over the period. For example, the Indonesian rupiah lost over 50% of its value against the U.S. dollar since the end of October 1997, while the South Korean won gave up almost 30%. Depreciating currencies in many of the countries prompted their central banks to raise interest rates substantially in an attempt to stem the declines and attract investment capital. Higher interest rates make borrowing more expensive and therefore tend to slow an economy - which is problematic because the pendulum has swung rapidly in most of these countries from strong growth to negligible growth or in some cases a contracting economy. Moreover, rising interest rates generally are not good for equity markets because they encourage some investors to transfer funds out of equities. A cheaper currency also raises the costs and lowers the earnings of companies that rely on importing goods and services from countries with stronger currencies. Hong Kong, an exception, continued to maintain a pegged or stable exchange rate for its currency against the U.S. dollar in spite of continuing pressure on this arrangement. All in all, it was a very challenging time for investors in the region's markets. Q. THE FUND'S RETURN - ALTHOUGH NEGATIVE - BESTED THOSE OF THE INDEX AND THE AVERAGE BY A FAIRLY WIDE MARGIN OVER THE PAST SIX MONTHS. CAN YOU EXPLAIN WHY? A. Negative returns were the norm for most Southeast Asian funds over the period - especially in U.S. dollar terms. However, some countries offered better investment opportunities than others. I tried to emphasize countries that had relatively stable currencies such as Hong Kong, Taiwan and Singapore. For example, I increased the fund's holdings in Taiwan from 11.9% to 15.1% over the period, mainly by purchasing technology stocks. I also increased the fund's holdings of Korean stocks from 2.2% to 7.2% because it seemed to me that after the Korean won depreciated so much earlier in the period, there were bargains to be found in that country. Within the countries I've mentioned, I looked for companies with good cash flows, low debt-to-equity ratios, strong managements and healthy export businesses. Weaker currencies help exporters to sell their goods and services abroad more competitively. With respect to the index and the average, the favorable performance of individual issues in the countries I mentioned enabled the fund to post a better return. Q. DO YOU CONSIDER INDUSTRY WEIGHTINGS IN YOUR STRATEGY? A. Not really. I use a bottom-up investment approach, which emphasizes careful analysis of the basic business prospects of individual companies. To some extent, I look at country weightings, too. But I don't give much thought to industry weightings. Q. WHAT HOLDINGS PERFORMED WELL FOR THE FUND? A. Hong Kong Telecommunications did well. Utility stocks in general tend to perform well during periods of market volatility because they are considered to be safer than stocks in other industries and are therefore purchased by investors as defensive investments. In addition, the stock benefited from speculation that the company might attempt to establish a stronger presence in mainland China. China, of course, represents a huge potential market for the company's services. HSBC Holdings also did well. This banking group has a highly respected management team and a huge presence in Hong Kong and other Southeast Asian countries, as well as good growth in developed markets such as the United States and the United Kingdom. This international exposure was attractive to investors because it was perceived to buffer the company's earnings from the recent volatility in the Pacific Basin. Finally, Taiwan Semiconductor helped the fund's performance. This extremely competitive company manufactures the advanced integrated circuits used in personal computers and other products. The stock responded well to healthy earnings reported by the company during the period. Q. WHAT HOLDINGS WERE DISAPPOINTING? A. Gulf Indonesia Resources was a drag on the fund's performance. The twin negatives of falling oil prices and volatility in the Indonesian market hurt this oil exploration company's share price. However, this is a well-managed company with potentially substantial oil reserves. It has been operating in Indonesia for more than 30 years and has weathered other rough periods, so the fund still holds this stock. Another holding that hurt the fund's performance was Sun Hung Kai Properties, which was a victim of the collapse in Hong Kong property values. This company, too, is very well managed and has a strong balance sheet. It is also a large and well-capitalized firm, with the stock comprising about 3.5% of the MSCI Combined Far East Ex-Japan Free Index. The stock remains one of the fund's top 10 holdings. Q. WHAT'S YOUR OUTLOOK, ALLAN? A. It will take some time for the countries in Southeast Asia to work themselves out of their current problems. It is important to realize that these problems are structural in nature and have developed over a number of years. They will not disappear overnight. Many marginal businesses have been protected by import tariffs and other protectionist policies that have made it unprofitable for competitors from other countries to sell their goods and services in the region. Moreover, formerly stable exchange rates encouraged excessive borrowing of U.S. dollars and overinvestment in marginally profitable ventures. The International Monetary Fund (IMF) is taking steps to improve the situation. For example, the IMF is working with the Thai government to pass new bankruptcy laws. While many unprofitable companies will go out of business, the new laws will ultimately lead to a more rational allocation of capital. In addition to the economic problems I've mentioned, some countries like Indonesia also have political instability that is an ongoing disincentive to investment. Until these problems are addressed, the fund's defensive strategy - emphasizing investment in the region's more stable countries and in the stocks of companies with strong managements, healthy cash flows, low debt and export-driven revenues - seems a prudent way to approach these markets. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. ALLAN LIU ON THE FACTORS CURRENTLY AFFECTING THE HONG KONG DOLLAR-U.S. DOLLAR EXCHANGE RATE: "In the short run, I think that the Hong Kong monetary authorities will probably be able to maintain the pegged - that is, stable - exchange rate between the Hong Kong dollar and the U.S. dollar. Stable exchange rates enable institutions and individuals to invest capital in Hong Kong without worrying about the adverse effects of currency depreciation. "Heightened investor cautiousness about Hong Kong is being reflected in sharply higher interest rates and significantly lower asset prices. Hong Kong stock prices, for example, have declined 38% from the peak registered in August 1997. Real estate prices have fallen by over 30%. The travel and tourism industry - a vital part of the Hong Kong economy - has seen tourist arrivals drop over 20% from what it was previously. "While these developments are painful in the short term, they have the effect of wringing the excesses out of the system. Once this process is completed and asset prices are down at sufficiently attractive levels, the flow of investment capital into Hong Kong will pick up again, and interest rates will be able to ease back down. Lower interest rates will help both the equity and real estate markets get back on track. "However, further shocks to the system could put more short-term downward pressure on the value of the Hong Kong dollar. One unknown variable is the Chinese economy. While the economy in China is still growing, it is slowing down, and some observers expect the Chinese to devalue their currency - the yuan, sometimes called the renminbi. Yet another devaluation in the Pacific Basin would add to the atmosphere of uncertainty in the region and put further pressure on the Hong Kong dollar-U.S. dollar link. However, a yuan devaluation also would have some beneficial consequences for Hong Kong. Many Hong Kong companies have manufacturing facilities in China, and these companies would see the costs of operating those facilities drop overnight. In addition, Hong Kong provides banking, shipping and other services to Chinese companies. Demand for those services would rise if there were an increase in Chinese exports due to a devaluation of the yuan. "The situation is quite complex and fluid. What we do know is that the Hong Kong government appears to be strongly committed to maintaining the current exchange rate for the Hong Kong and United States currencies. Aside from the big-picture economic considerations I've mentioned, there are many well-managed companies in Hong Kong that are generating healthy profits even in the current uncertain environment. Because of these factors, there is no doubt in my mind that Hong Kong merits the heaviest weighting of all the countries in which the fund has investments." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of Southeast Asian issuers; the fund does not anticipate investing in Japan FUND NUMBER: 351 TRADING SYMBOL: FSEAX START DATE: April 19, 1993 SIZE: as of April 30, 1998, more than $255 million MANAGER: Allan Liu, since inception; manager, various funds for non-U.S. investors; analyst, Southeast Asian markets, 1987-1990; joined Fidelity in 1987 (checkmark) SOUTHEAST ASIA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 UNITED STATES 3.2% CHINA 3.3% UNITED KINGDOM 5.9% ROW: 1, COL: 1, VALUE: 3.3 ROW: 1, COL: 2, VALUE: 36.6 ROW: 1, COL: 3, VALUE: 7.2 ROW: 1, COL: 4, VALUE: 8.800000000000001 ROW: 1, COL: 5, VALUE: 3.2 ROW: 1, COL: 6, VALUE: 12.9 ROW: 1, COL: 7, VALUE: 15.1 ROW: 1, COL: 8, VALUE: 3.8 ROW: 1, COL: 9, VALUE: 5.9 ROW: 1, COL: 10, VALUE: 3.2 THAILAND 3.8% HONG KONG 36.6% TAIWAN 15.1% SINGAPORE 12.9% OTHER 3.2% KOREA 7.2% MALAYSIA 8.8% AS OF OCTOBER 31, 1997 UNITED STATES 9.2% ROW: 1, COL: 1, VALUE: 7.0 ROW: 1, COL: 2, VALUE: 39.3 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 6.0 ROW: 1, COL: 5, VALUE: 4.8 ROW: 1, COL: 6, VALUE: 13.8 ROW: 1, COL: 7, VALUE: 11.9 ROW: 1, COL: 8, VALUE: 3.6 ROW: 1, COL: 9, VALUE: 9.199999999999999 CHINA 7.0% UNITED KINGDOM 3.6% TAIWAN 11.9% HONG KONG 39.3% SINGAPORE 13.8% OTHER 4.8% MALAYSIA 6.0% INDONESIA 4.4% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 96.8 90.7 BONDS 0.0 0.1 SHORT-TERM INVESTMENTS 3.2 9.2 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO HUTCHISON WHAMPOA LTD. ORD. 7.5 7.9 (HONG KONG, ELECTRICAL EQUIPMENT) HONG KONG TELECOMMUNICATIONS LTD. 6.8 6.2 (HONG KONG, TELEPHONE SERVICES) HSBC HOLDINGS PLC 5.9 3.6 (UNITED KINGDOM, BANKS) CHEUNG KONG HOLDINGS LTD. 4.3 4.2 (HONG KONG, REAL ESTATE) SUN HUNG KAI PROPERTIES LTD. 3.9 5.0 (HONG KONG, REAL ESTATE) HANG SENG BANK LTD. 2.9 3.4 (HONG KONG, BANKS) TAIWAN SEMICONDUCTOR 2.3 0.9 MANUFACTURING CO. LTD. (TAIWAN, ELECTRONICS) CLP HOLDINGS LTD. 1.9 0.0 (HONG KONG, ELECTRIC UTILITY) HONG KONG & CHINA GAS CO. LTD. 1.8 2.0 (HONG KONG, GAS) COMPAL ELECTRONICS, INC. 1.7 0.7 (TAIWAN, COMPUTERS & OFFICE EQUIPMENT) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 19.0 15.0 UTILITIES 16.4 14.8 FINANCE 16.3 10.9 CONSTRUCTION & REAL ESTATE 12.1 12.6 INDUSTRIAL MACHINERY & EQUIPMENT 10.3 10.9 MEDIA & LEISURE 4.9 4.4 TRANSPORTATION 3.4 4.0 ENERGY 3.3 4.9 BASIC INDUSTRIES 2.6 3.4 DURABLES 2.6 0.8 SOUTHEAST ASIA INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 96.8% SHARES VALUE (NOTE 1) CHINA (PEOPLES REPUBLIC) - 3.3% First Tractor Co. Ltd. Class H 3,798,000 $ 2,119,940 Guangdong Kelon Electric Holding Class H 1,032,000 1,058,837 Harbin Power Equipment Co. Ltd. Class H 6,970,000 953,501 Huaneng Power International, Inc. Class H (a) 542,000 304,278 Qingling Motors Co. Ltd. Class H 2,808,000 1,214,015 Zhenhai Refining & Chemical Co. Class H 5,740,000 1,574,175 Zhejiang Expressway Co. Class H 4,886,000 1,179,173 8,403,919 HONG KONG - 36.6% Chu Kong Shipping Development Co. Ltd. (a) 1,472,000 227,967 Cheung Kong Holdings Ltd. 1,665,000 11,066,335 China Aerospace International Holdings Ltd. 2,140,000 469,510 China Telecom (Hong Kong) Ltd. 1,794,000 3,464,662 China Resources Beijing Land Ltd. 684,000 361,928 China Overseas Land & Investment Ltd. (a) 2,048,000 470,470 China Resources Enterprise Ltd. 384,000 659,121 China Everbright-IHD Pacific Ltd. (a) 668,000 452,604 CLP Holdings Ltd. 1,010,000 4,848,938 Cosco Pacific Ltd. 964,000 653,159 First Pacific Co. Ltd. (a) 1,110,000 533,619 Guangnan Holdings 714,000 460,734 Guangdong Brewery Holdings Ltd. 1,720,000 244,176 Hang Seng Bank Ltd. 892,000 7,511,518 Hong Kong & China Gas Co. Ltd. 3,330,360 4,534,465 Hong Kong & China Gas Co. Ltd. warrants 9/30/99 (a) 151,380 - Hong Kong Telecommunications Ltd. 9,022,000 17,423,737 Hong Kong Electric Holdings Ord. 640,000 1,965,800 Hutchison Whampoa Ltd. Ord. 3,094,000 19,126,618 Johnson Electric Holdings Ltd. 40,000 135,510 Ng Fung Hong Ltd. 730,000 659,483 New World Development Co. Ltd. 1,267,100 3,605,802 Shanghai Industrial Holdings Ltd. Class H 571,000 1,956,514 Sun Hung Kai Properties Ltd. 1,696,000 10,068,529 Swire Pacific Ltd. Class A 130,000 649,287 Television Broadcast Ltd. Ord. 572,000 1,461,651 Tianjin Development Holdings Ltd. 482,000 550,519 93,562,656 INDONESIA - 2.0% PT Astra Argo Niaga Lestari Tbk (a) 1,661,000 721,497 PT Telekomunikasi Indonesia Persero, Series B, sponsored ADR 78,000 624,000 Gulf Indonesia Resources Ltd. 247,500 3,805,313 5,150,810 KOREA (SOUTH) - 7.2% Hyundai Engineering & Construction Co. Ltd. (a) 8 40 Hyundai Engineering & Construction Co. rights 5/6/98 (a) 1 - Hyundai Mipo Dockyard Co. Ltd. 41,200 554,883 Korea Electric Power Corp. 51,800 705,395 Korea Fine Chemical Co. Ltd. 29,200 699,140 SHARES VALUE (NOTE 1) Lg Electronics, Inc. 84,900 $ 1,010,034 Medison Co. Ltd. 56,800 463,240 Mirae Corp. 230,000 671,156 Mirae Corp rights 5/20/98 (a) 47,214 28,261 Samsung Electronics Co. Ltd. (vtg.) 73,700 4,080,659 Samsung Electronics Co. Ltd. rights 6/1/98 (a) 5,863 113,180 Samsung Co. Ltd. sponsored GDR (a) 21 16 Seondo Electric Co. Ltd. 176,000 2,870,782 Seong An Co. Ltd. 166,580 1,371,029 S1 Corp. 14,175 2,015,152 Sewoo Polymer Co. Ltd. 57,300 793,154 Samsung Display Devices Ltd. rights 5/11/98 (a) 680 11,804 Suheung Capsule Co. Ltd. 54,000 729,293 Sindo Ricoh Co. 8,000 281,332 Samsung Fire & Marine Insurance 5,624 1,662,162 Youngone Corp. 13,600 310,363 18,371,075 MALAYSIA - 8.8% Berjaya Sports Toto BHD 1,130,833 2,681,279 Commerce Asset Holding BHD 700,000 525,117 Gamuda BHD 103,000 116,453 Genting BHD 428,000 1,421,889 Konsortium Perkapalan BHD 538,000 435,301 Magnum Corp. BHD 200,000 133,958 Malaysia International Shipping BHD (For. Reg.) 1,390,000 2,420,630 Malakoff BHD 315,000 827,060 Malaysian Resources Corp. BHD 387,000 164,857 Perusahaan Otomobil Nasional BHD 338,000 418,368 Resorts World BHD 935,000 1,803,617 Rothmans of Pall Mall Malaysia BHD 287,000 2,364,434 Petronas Gas BHD 515,000 1,241,795 Selangor Properties BHD 565,000 242,197 Sungei Way Holdings BHD 705,000 203,992 Tanjong PLC 493,000 1,122,706 Technology Resources Industries BHD 762,000 783,946 Tenega Nasional BHD 1,073,000 2,141,688 Time Engineering BHD 330,000 114,052 Telekom Malaysia BHD 620,000 1,860,415 United Engineers BHD 1,361,000 1,090,259 YTL Corp. BHD 274,000 425,774 22,539,787 PHILIPPINES - 1.2% Manila Electric Co. Class B 202,851 574,535 Music Corp. (a) 4,176,400 1,245,138 Petron Corp. 1,848,000 270,887 Philippine Long Distance Telephone 38,000 1,014,907 3,105,467 SINGAPORE - 12.9% City Developments Ltd. 165,000 713,767 Creative Technology Ltd. (a) 48,200 988,100 Creative Technology Ltd. (SGD) (a) 88,000 1,828,355 Datacraft Asia Ltd. 847,000 2,845,920 DBS Land Ltd. 215,000 324,503 Development Bank of Singapore Ltd. (For. Reg.) 297,000 1,969,372 Development Bank of Singapore Class A (For. Reg.)(a) 100,800 655,662 Elec & Eltek International Co. Ltd. 23,400 135,720 Flextech Holdings Ltd. 947,000 771,475 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SINGAPORE - CONTINUED Flextech Holdings Ltd. warrants 10/22/02 (a) 284,100 $ 61,000 FHTK Holdings Ltd. 5,616,000 1,170,369 JIT Holdings Ltd. (a) 2,999,000 2,443,139 Natsteel Ltd. 1,177,000 1,546,044 Overseas Union Bank Ltd. (For. Reg.) 85,000 322,071 Overseas Chinese Banking Corp. 477,000 2,515,283 Rothmans Industries Ltd. 132,000 658,541 St. Computer Systems & Services Ltd. 956,000 1,310,085 Sembawang Shipyard Ltd. 26,000 51,885 Singapore International Airlines Ltd. 198,000 1,287,907 Singapore Press Holdings 251,196 2,776,085 Singapore Telecommunications Ltd. 812,000 1,394,784 Singapore Technologies Engineering Ltd. (a) 1,906,175 1,637,132 United Overseas Bank Ltd. (For. Reg.) 659,500 3,123,619 Venture Manufacturing Singapore Ltd. 684,000 2,483,739 33,014,557 TAIWAN - 15.1% Asustek Computer, Inc. (a) 209,000 4,259,287 Aurora Corp. (a) 351,000 681,254 Bank Sinopac (a) 1,060,000 771,505 CTCI Corp. 844,000 1,202,990 Compal Electronics, Inc. (a) 1,026,600 4,467,607 Cathay Life Insurance Co. Ltd. 647,000 2,590,001 Chuntex Electronic Co. Ltd. (a) 320,000 587,120 China Development Corp. (a) 718,500 1,950,166 D-Link Corp. 1,036,000 2,654,839 Everest Textile Co. Ltd. (a) 1,708,000 2,149,600 Far Eastern Silo & Shipping Corp. 2,634,000 2,492,253 Orient Semiconductor Electronics Ltd. (a) 232,000 506,573 Phoenixtec Power Company (a) 705,000 2,298,367 Siliconware Precision Industries (a) 919,000 2,229,602 Taiwan Mask Corp. (a) 891,000 3,458,673 Taiwan Semiconductor Manufacturing Co. Ltd. (a) 1,354,500 5,853,500 Tatung Co. 544,000 503,177 38,656,514 THAILAND - 3.8% Advanced Information Services (For. Reg.) 179,400 1,256,498 Bangkok Bank Public Co. Ltd. (For. Reg.) 416,100 1,025,409 BEC World PCL (For. Reg.) 38,100 201,619 Cogeneration Public Company Limited (For. Reg.) 306,200 182,687 Eastern Water Resources Development & Management PCL (For. Reg.) 262,100 305,953 International Broadcasting Corp. (For. Reg.) (a) 670,300 834,615 Malee Sampran Factory PCL (For. Reg.) (a) 743,900 501,722 National Finance & Securities PCL (For. Reg.) 1,566,200 700,829 National Petrochemical Co. (a) 556,900 469,501 Nava Finance & SEC PCL (For. Reg.) 960,600 137,051 PTT Exploration & Production (For. Reg.) 109,000 1,153,619 Siam Cement PCL (For. Reg.) 38,800 549,541 Shinawatra Computer & Communication PCL (For. Reg.) 168,800 1,059,652 SHARES VALUE (NOTE 1) Thai Farmers Bank PCL 494,000 $ 1,134,086 Thai Union Frozen Products PCL (For. Reg.) 70,900 275,875 9,788,657 UNITED KINGDOM - 5.9% HSBC Holdings PLC 509,465 14,981,368 TOTAL COMMON STOCKS (Cost $278,770,224) 247,574,810 NONCONVERTIBLE BONDS - 0.0% MOODY'S PRINCIPAL RATINGS AMOUNT SINGAPORE - 0.0% Flextech Holdings Ltd. 2 1/4%, 1/1/02 (Cost $151,850) - SGD 236,750 79,988 CASH EQUIVALENTS - 3.2% SHARES Taxable Central Cash Fund (b) (Cost $8,115,178) 8,115,178 8,115,178 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $287,037,252) $ 255,769,976 CURRENCY ABBREVIATIONS SGD - Singapore dollar LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $142,029,301 and $119,563,255, respectively. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.2% Basic Industries 2.6 Cash Equivalents 3.2 Construction & Real Estate 12.1 Durables 2.6 Energy 3.3 Finance 16.3 Health 0.5 Holding Companies 1.2 Industrial Machinery & Equipment 10.3 Media & Leisure 4.9 Nondurables 2.1 Retail & Wholesale 1.1 Services 0.8 Technology 19.0 Transportation 3.4 Utilities 16.4 100.0% INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $287,336,714. Net unrealized depreciation aggregated $31,566,738, of which $16,425,859 related to appreciated investment securities and $47,992,597 related to depreciated investment securities. At October 31, 1997, the fund had a capital loss carryforward of approximately $32,652,000 all of which will expire on October 31, 2005. SOUTHEAST ASIA FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 255,769,976 (COST $287,037,252) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 1,250,745 (COST $1,248,312) RECEIVABLE FOR INVESTMENTS SOLD 1,176,114 RECEIVABLE FOR FUND SHARES SOLD 378,826 DIVIDENDS RECEIVABLE 399,329 INTEREST RECEIVABLE 46,877 REDEMPTION FEES RECEIVABLE 216 TOTAL ASSETS 259,022,083 LIABILITIES PAYABLE TO CUSTODIAN BANK $ 108,233 PAYABLE FOR INVESTMENTS PURCHASED 1,924,314 PAYABLE FOR FUND SHARES REDEEMED 697,322 ACCRUED MANAGEMENT FEE 249,443 OTHER PAYABLES AND 463,065 ACCRUED EXPENSES TOTAL LIABILITIES 3,442,377 NET ASSETS $ 255,579,706 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 377,562,472 DISTRIBUTIONS IN EXCESS OF (332,186) NET INVESTMENT INCOME ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN (90,375,028) CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (31,275,552) AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 28,426,421 SHARES OUTSTANDING $ 255,579,706 NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($255,579,706 (DIVIDED BY) 28,426,421 SHARES) $8.99 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $8.99) $9.27
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 2,439,732 DIVIDENDS INTEREST 658,055 TOTAL INCOME 3,097,787 EXPENSES MANAGEMENT FEE $ 1,018,260 BASIC FEE PERFORMANCE ADJUSTMENT 527,609 TRANSFER AGENT FEES 570,673 ACCOUNTING FEES AND EXPENSES 104,649 NON-INTERESTED TRUSTEES' COMPENSATION 508 CUSTODIAN FEES AND EXPENSES 377,268 REGISTRATION FEES 20,656 AUDIT 37,537 LEGAL 859 REPORTS TO SHAREHOLDERS 37,377 MISCELLANEOUS 790 TOTAL EXPENSES BEFORE REDUCTIONS 2,696,186 EXPENSE REDUCTIONS (70,029) 2,626,157 NET INVESTMENT INCOME 471,630 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (55,279,069) FOREIGN CURRENCY TRANSACTIONS (1,106,836) (56,385,905) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 42,794,086 ASSETS AND LIABILITIES IN 598,947 43,393,033 FOREIGN CURRENCIES NET GAIN (LOSS) (12,992,872) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (12,521,242) OTHER INFORMATION SALES CHARGES PAID TO FDC $ 372,627 SALES CHARGES - DEALERS' PORTION $ 679 EXPENSE REDUCTIONS $ 67,786 DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 1,828 TRANSFER AGENT CREDITS 415 $ 70,029
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 471,630 $ 1,305,926 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) (56,385,905) (28,617,300) CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 43,393,033 (92,383,800) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (12,521,242) (119,695,174) DISTRIBUTIONS TO SHAREHOLDERS (1,127,260) (4,930,534) FROM NET INVESTMENT INCOME IN EXCESS OF NET INVESTMENT INCOME (332,186) (3,526,327) FROM NET REALIZED GAIN - (19,898,492) TOTAL DISTRIBUTIONS (1,459,446) (28,355,353) SHARE TRANSACTIONS 90,671,536 157,877,019 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 1,428,081 27,853,163 COST OF SHARES REDEEMED (101,788,474) (514,623,033) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (9,688,857) (328,892,851) REDEMPTION FEES 402,286 444,381 TOTAL INCREASE (DECREASE) IN NET ASSETS (23,267,259) (476,498,997) NET ASSETS BEGINNING OF PERIOD 278,846,965 755,345,962 END OF PERIOD (INCLUDING UNDER (OVER) DISTRIBUTION OF NET INVESTMENT INCOME OF $(332,186) AND $752,671, RESPECTIVELY) $ 255,579,706 $ 278,846,965 OTHER INFORMATION SHARES SOLD 10,040,169 11,474,774 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 142,524 1,884,517 REDEEMED (10,954,980) (35,591,294) NET INCREASE (DECREASE) (772,287) (22,232,003)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED OCTOBER 31, APRIL 19, 1993 APRIL 30, 1998 (COMMENCEMENT OF OPERATIONS) TO SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 1995 1994 OCTOBER 31, 1993 NET ASSET VALUE, BEGINNING OF PERIOD $ 9.55 $ 14.69 $ 13.88 $ 14.61 $ 13.24 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .02 D .04 D, E .14 D .15 .04 .01 NET REALIZED AND UNREALIZED GAIN (LOSS) (.54) (4.62) .87 (.91) 1.23 3.22 TOTAL FROM INVESTMENT OPERATIONS (.52) (4.58) 1.01 (.76) 1.27 3.23 LESS DISTRIBUTIONS (.04) (.10) (.23) - (.04) - FROM NET INVESTMENT INCOME IN EXCESS OF NET INVESTMENT INCOME (.01) (.07) - - (.03) - FROM NET REALIZED GAIN - (.40) - - - - TOTAL DISTRIBUTIONS (.05) (.57) (.23) - (.07) - REDEMPTION FEES ADDED TO PAID IN CAPITAL .01 .01 .03 .03 .17 .01 NET ASSET VALUE, END OF PERIOD $ 8.99 $ 9.55 $ 14.69 $ 13.88 $ 14.61 $ 13.24 TOTAL RETURN B, C (5.39)% (32.48)% 7.59% (5.00)% 10.87% 32.40% RATIOS AND SUPPLEMENTAL DATA $ 255,580 $ 278,847 $ 755,346 $ 649,868 $ 825,734 $ 499,669 NET ASSETS, END OF PERIOD (000 OMITTED) RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.00% A 1.32% 1.13% 1.10% 1.47% 2.00% A, F RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.95% A, G 1.32% 1.12% G 1.10% 1.47% 2.00% A, RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .35% A .22% .95% .90% .22% .45% A PORTFOLIO TURNOVER RATE 97% A 141% 102% 94% 157% 14% A AVERAGE COMMISSION RATE H $ .0044 $ .0063 $ .0129
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
UNITED KINGDOM PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF APRIL 30, 1998 MONTHS YEAR FUND FIDELITY UNITED KINGDOM 19.82% 34.60% 75.75% FIDELITY UNITED KINGDOM 16.23% 30.56% 70.48% (INCL. 3.00% SALES CHARGE) FT-SE ALL-SHARES 22.86% 38.33% 87.38% EUROPEAN REGION FUNDS AVERAGE 26.03% 39.23% N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on November 1, 1995. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the FT-All-Shares Index - a market capitalization weighted index of over 750 stocks traded in the U.K. market. To measure how the fund's performance stacked up against its peers, you can compare the fund's performance to the European region funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 93 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF APRIL 30, 1998 YEAR FUND FIDELITY UNITED KINGDOM 34.60% 25.35% FIDELITY UNITED KINGDOM 30.56% 23.83% (INCL. 3.00% SALES CHARGE) FT-SE ALL-SHARES 38.33% 28.61% EUROPEAN REGION FUNDS AVERAGE 39.23% N/A AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND United Kingdom FT SE A All Shares 00344 FT001 1995/11/01 9700.00 10000.00 1995/11/30 9573.90 10045.63 1995/12/31 9778.19 10332.30 1996/01/31 9729.49 10310.34 1996/02/29 9963.23 10460.66 1996/03/31 10099.58 10580.27 1996/04/30 10411.24 10783.02 1996/05/31 10722.89 10999.14 1996/06/30 10596.28 10897.13 1996/07/31 10430.72 10838.63 1996/08/31 10927.42 11423.97 1996/09/30 11005.33 11641.61 1996/10/31 11579.95 12221.95 1996/11/30 12183.78 12823.08 1996/12/31 12575.73 13285.32 1997/01/31 12205.27 12911.20 1997/02/28 12555.71 13299.67 1997/03/31 12565.72 13420.62 1997/04/30 12665.85 13546.04 1997/05/31 13016.28 14119.45 1997/06/30 13216.53 14307.89 1997/07/31 13526.92 14788.25 1997/08/31 13366.72 14587.42 1997/09/30 14408.03 15706.71 1997/10/31 14227.80 15250.76 1997/11/30 14347.95 15309.01 1997/12/31 14686.21 15781.29 1998/01/31 15115.63 16509.20 1998/02/28 16103.30 17613.50 1998/03/31 17037.29 18678.26 1998/04/30 17048.02 18737.66 IMATRL PRASUN SHR__CHT 19980430 19980506 115337 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity United Kingdom Fund on November 1, 1995, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by April 30, 1998, the value of the investment would have grown to $17,048 - a 70.48% increase on the initial investment. For comparison, look at how the FT-All-Shares Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $18,738 - an 87.38% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) UNITED KINGDOM FUND TALK: THE MANAGER'S OVERVIEW An interview with Simon Roberts, Portfolio Manager of Fidelity United Kingdom Fund Q. HOW DID THE FUND PERFORM, SIMON? A. For the six months that ended April 30, 1998, the fund returned 19.82%, compared to the 22.86% return of the FT-All-Shares Index, and the European region funds average of 26.03%, as tracked by Lipper Analytical Services. For the one-year period, the fund returned 34.60%, compared to the FT-All-Shares Index return of 38.33% and the Lipper European region funds average return of 39.23%. Q. WHAT WERE THE FACTORS THAT CONTRIBUTED TO PERFORMANCE? A. The British economy is still growing nicely, with the stock market turning in a good performance led by the financial sector, which tends to dominate. The fund did not do quite as well as the FT-All-Shares Index during the six months because the index is dominated by larger-company stocks, while the fund tends to look for additional opportunities in small- and medium-sized companies. Through most of the six-month period, large-capitalization stocks continued to lead the market. Since the end of February, however, small- and mid-cap companies appeared to have turned the corner and started outperforming large-cap stocks. At the end of the period, I was reducing the fund's large-cap holdings and buying smaller caps. The fund's underweighting in finance was a factor in trailing the market index. Q. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT DURING THE PERIOD? A. Favorable interest rates, controlled inflation and economic growth have supported the market, while the value of the pound Sterling has been a problem affecting industrial companies principally. While the Bank of England has raised interest rates five times in a year, the market expects that rates may have reached a plateau, with no further increases likely. The inflationary outlook is good, with the most recent Bank of England report anticipating that inflation will be down to the government's target of about 2.5% this year. General growth has been strong, particularly in major sectors such as finance, services and consumer goods. The only concern has been the Sterling's strength against other European currencies. This hurt the manufacturing and general industrial sector, which had difficulty competing with cheaper goods imported from Europe or the Far East. More recently, however, there was evidence that the Sterling may have peaked, which would be positive for the manufacturing sector. While manufacturing-company stocks in general have been lagging companies in other industries, it is important to keep in mind that the general industrial sector is not large in the United Kingdom, accounting for just 12% of the capitalization of the FT-All-Shares Index. The market is dominated by finance, services, consumer and utility companies, which tended to do well. Q. WHAT WERE YOUR PRINCIPAL STRATEGIES DURING THE SIX MONTHS? A. My principal strategy was, as usual, to look for stocks whose fundamentals I believed would surprise the market, and whose company outlook was not reflected in the share price. I continued to build the portfolio from the bottom up, on a stock-by-stock basis, using Fidelity's own stock research. As a general rule, I believe our ability to add value from research is greatest in small- and medium-sized companies. In the long run, I believe this approach should lead to strong relative performance, although it may have hurt the fund in the past six months. I have moved toward manufacturing and industrial companies, where I believed market expectations were too negative. Q. WHAT WERE SOME EXAMPLES OF FUND INVESTMENTS IN MEDIUM- AND SMALL-SIZED COMPANIES? A. I found some good opportunities among specialty chemical companies. One outstanding example was BTP, which the fund has owned for less than one year. This company manufactures the active ingredient in the anti-impotence drug Viagra, which very recently attracted attention throughout the world. Another good holding was British Vita, a manufacturer of industrial foams. Q. ALTHOUGH THE FINANCE INDUSTRY WAS THE FUND'S LARGEST EMPHASIS AT 16.8% OF PORTFOLIO ASSETS ON APRIL 30, IT WAS UNDERWEIGHTED VERSUS THE FT-ALL-SHARES INDEX, WHERE IT MADE UP 24% OF THE MARKET. WHAT WAS YOUR STRATEGY HERE? A. I believed the share prices of finance companies fully reflected their prospects. They've been through a very good period. Going forward, I believe there will be pressures on certain areas of finance, especially mortgages. Within the finance sector, Bank of Scotland, the fastest-growing bank in the U.K., was the fund's second-best performer during the period. This bank has been innovative in product development, introducing new mortgage and savings products. Q. ANOTHER MAJOR EMPHASIS WAS IN PHARMACEUTICALS. HOW HAVE THEY DONE? A. The investments in the pharmaceutical industry have done very well. I concentrated on three large companies: Glaxo Wellcome, SmithKline Beecham and Zeneca Group. All three closely followed developments in the United States, where they have high sales. All three stocks did well because of strong sales volume and speculation about mergers and consolidation. Q. WHAT OTHER AREAS CONTRIBUTED TO PERFORMANCE? A. Media and leisure companies did very well, particularly hotel companies benefiting from very high occupancy rates. One very good performer was Ladbroke Group, which, in addition to operating hotels in the United Kingdom, owns the Hilton Hotels that are located outside the United States. I also owned a number of telecommunications companies that did extremely well. The best-performing stock in the fund was Vodafone, which operates cellular phone systems in the U.K. Its subscriber growth has been very strong. Another telecommunications stock that helped performance was Cable & Wireless Communications, a cable television and telephone system operator in the U.K. Q. HAVE THERE BEEN ANY DISAPPOINTMENTS? A. Yes. The first disappointment was in a major stock that did well but that the fund did not own. This was British Telecom. I preferred other telecommunications companies such as Vodafone because of the superior long-term growth opportunities of cellular companies over fixed-line companies. Among the disappointing stocks I did own were Monument Oil & Gas, and Albert Fisher Group, a food processing company. Monument Oil & Gas was hurt by a slump in world oil prices and by disappointments in some of its exploration sites. Albert Fisher had problems in its seafood division. Q. WHAT IS YOUR OUTLOOK? A. After the most recent interest rate increase, I think there are signs that interest rates and the pound Sterling could have peaked. As a result, U.K. manufacturers should start to improve performance. I have overweighted areas such as chemicals, packaging, engineering, automotive components and paper, which should become more competitive in the absence of currency problems. I see the best opportunities more in the medium-sized and small-sized companies. I think the overall market index may not repeat the extraordinary returns of the past year because many major industries, such as finance, are fully priced. However, careful investments in selected medium- and small-cap companies should provide an opportunity to produce good returns. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. SIMON ROBERTS ON THE EUROPEAN ECONOMIC UNION AND THE EUROPEAN MONETARY UNION: "The United Kingdom is part of the European Economic Union, but not of the European Monetary Union, which is establishing the single-currency Euro in stages, beginning at the end of 1998. The recent performance of European economies has been split. The larger countries such as Germany and France have had weaker economies, although they have shown signs of strength more recently. Other nations, including Spain, Italy and Ireland, have shown strong growth. The U.K. was somewhere in the middle. "The European Monetary Union will be occurring at a time when the European economies are not in sync with each other. This is the reason that the U.K. has decided not to enter it. Because of this lack of synchronization, European currencies have been weak relative to the dollar and the pound Sterling. However, once the Euro is established as a single currency, there seems to be no reason why it should not be a strong currency because of the tight monetary and fiscal policies being implemented by the member countries as they prepare for the single currency's introduction. U.K. companies will see their competitiveness improve because their goods and products will appear cheaper against the products of other European countries. Recently, goods made by British companies have had difficulty competing either in Europe or in the U.K. itself because of the strong pound Sterling. "On balance, the European Monetary Union is positive for U.K. companies even if the U.K. doesn't enter the system immediately. That's because both the EEU and the EMU will create a single, seamless market, rather than the many markets with which they deal now." FUND FACTS GOAL: long-term growth of capital by investing mainly in equity securities of British issuers: FUND NUMBER: 344 TRADING SYMBOL: FUTYF START DATE: November 1, 1995 SIZE: as of April 30, 1998, more than $7 million MANAGER: Simon Roberts, since July 1997 manager, Fidelity Germany Fund, 1995-1996; director of United Kingdom and European Research, Fidelity International, Limited, since 1994; joined Fidelity in 1992 (checkmark) UNITED KINGDOM INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION (% OF FUND'S INVESTMENTS) AS OF APRIL 30, 1998 OTHER 0.5% UNITED STATES 2.2% ROW: 1, COL: 1, VALUE: 3.2 ROW: 1, COL: 2, VALUE: 95.3 ROW: 1, COL: 3, VALUE: 1.5 UNITED KINGDOM 97.3% AS OF OCTOBER 31, 1997 OTHER 0.3% UNITED STATES 4.1% ROW: 1, COL: 1, VALUE: 4.1 ROW: 1, COL: 2, VALUE: 95.3 ROW: 1, COL: 3, VALUE: 1.0 UNITED KINGDOM 95.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO STOCKS 97.8 95.9 SHORT-TERM INVESTMENTS 2.2 4.1 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO LLOYDS TSB GROUP PLC 4.1 3.7 (BANKS) GLAXO WELLCOME PLC 3.5 3.7 (DRUGS & PHARMACEUTICALS) SHELL TRANSPORT & TRADING CO. PLC (REG.) 3.4 5.0 (OIL & GAS) BRITISH PETROLEUM PLC ORD. 3.1 4.5 (OIL & GAS) VODAFONE GROUP PLC 2.9 1.6 (CELLULAR) SMITHKLINE BEECHAM PLC ORD. 2.6 1.9 (DRUGS & PHARMACEUTICALS) BANK OF SCOTLAND 2.4 1.5 (BANKS) HSBC HOLDINGS PLC (REG.) 2.4 4.0 (BANKS) ZENECA GROUP PLC ORD. 2.3 1.7 (DRUGS & PHARMACEUTICALS) SCOTTISH & NEWCASTLE BREWERS PLC 2.1 0.8 (BEVERAGES) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO FINANCE 16.8 13.4 NONDURABLES 12.1 12.1 HEALTH 9.0 8.6 UTILITIES 8.5 9.1 ENERGY 7.8 10.8 MEDIA & LEISURE 7.3 6.7 RETAIL & WHOLESALE 7.0 9.1 BASIC INDUSTRIES 6.6 4.8 CONSTRUCTION & REAL ESTATE 6.5 5.3 TRANSPORTATION 3.8 1.7 UNITED KINGDOM INVESTMENTS APRIL 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 97.8% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.2% Smiths Industries PLC Ord. 6,300 $ 90,577 BASIC INDUSTRIES - 6.6% CHEMICALS & PLASTICS - 2.7% Albright & Wilson PLC 1,960 5,698 BTP PLC 5,830 41,203 British Polythene Industries PLC 7,290 60,535 British Vita Ord. 6,430 34,916 Inspec Group PLC 4,700 22,969 McKechnie PLC 4,630 38,524 203,845 IRON & STEEL - 0.5% Richardsons Westgarth PLC Class L 28,600 37,989 METALS & MINING - 2.4% English China Clay PLC 13,340 54,941 Johnson Matthey PLC 3,600 36,450 Rio Tinto PLC (Reg.) 5,900 84,629 176,020 PAPER & FOREST PRODUCTS - 1.0% Graham Group PLC 3,100 9,789 Rexam PLC 4,950 22,578 Smith Holdings PLC 10,570 40,619 72,986 TOTAL BASIC INDUSTRIES 490,840 CONSTRUCTION & REAL ESTATE - 6.5% BUILDING MATERIALS - 1.5% Aggregate Industries PLC 33,749 41,727 Ibstock Johnsen PLC 32,050 28,381 Norcros PLC Class L 18,950 21,530 Polypipe PLC 5,710 17,745 109,383 CONSTRUCTION - 2.6% Amec PLC Ord. 12,000 36,691 Barratt Developments PLC 5,100 27,310 Beazer Group PLC 12,110 39,860 Bovis Homes Group PLC (a) 5,100 22,070 Countryside Properties PLC 6,700 12,650 Persimmon PLC Ord. 12,490 50,919 189,500 ENGINEERING - 0.4% Weir Group PLC (The) 6,060 27,844 REAL ESTATE - 1.7% CLS Holdings PLC 3,200 7,539 Daejan Holdings PLC 600 16,691 Development Securities PLC 1,600 9,236 Great Portland Estates 5,000 23,266 Mucklow (A & J) Group PLC 9,710 25,471 Wates City of London Property PLC (a) 27,940 44,581 126,784 REAL ESTATE INVESTMENT TRUSTS - 0.3% Minerva PLC 4,800 18,847 Prestbury Group PLC 52,500 5,263 24,110 TOTAL CONSTRUCTION & REAL ESTATE 477,621 DURABLES - 3.7% AUTOS, TIRES, & ACCESSORIES - 2.3% Britax International PLC 12,500 33,834 Dennis Group PLC 6,430 33,949 SHARES VALUE (NOTE 1) Laird Group 4,990 $ 36,893 Mayflower Corp. 10,900 44,072 Partco Group PLC 4,700 23,401 172,149 TEXTILES & APPAREL - 1.4% Berisford (S.W.) PLC 7,510 28,107 Black (Peter) Holdings PLC 3,790 25,203 Courtaulds Textiles PLC 5,140 27,567 House of Fraser PLC Class L 8,010 21,279 102,156 TOTAL DURABLES 274,305 ENERGY - 7.8% COAL - 0.5% RJB Mining PLC 18,700 38,430 ENERGY SERVICES - 0.3% Sidlaw Group PLC 11,500 20,943 OIL & GAS - 7.0% British Petroleum PLC Ord. 14,541 229,467 Monument Oil and Gas PLC (a): Class L 34,230 36,174 rights 5/13/98 6,157 874 Shell Transport & Trading Co. PLC (Reg.) 34,200 254,279 520,794 TOTAL ENERGY 580,167 FINANCE - 16.8% BANKS - 10.8% Barclays PLC Ord. 5,002 144,164 Bank of Scotland 14,400 176,837 HSBC Holdings PLC (Reg.) 5,969 175,525 Lloyds TSB Group PLC 20,491 306,587 803,113 CLOSED END INVESTMENT COMPANY - 1.9% 3I Group PLC 12,300 121,147 Benfield & Realty Investment Trust PLC 9,600 21,894 143,041 CREDIT & OTHER FINANCE - 0.4% Alliance & Leicester PLC 1,900 26,539 INSURANCE - 3.7% Britannic Assurance Ord. (a) 60 1,238 Commercial Union PLC 3,700 69,176 General Accident Fire & Life 2,500 58,854 London Insurance Market Investment Trust PLC 12,070 35,090 New London Capital PLC 12,200 16,307 Norwich Union PLC (a) 12,080 90,169 270,834 TOTAL FINANCE 1,243,527 HEALTH - 9.0% DRUGS & PHARMACEUTICALS - 8.9% AEA Technology PLC 3,120 37,429 Glaxo Wellcome PLC 9,172 258,985 SmithKline Beecham PLC Ord. 16,239 193,452 Zeneca Group PLC Ord. 3,930 169,146 659,012 MEDICAL EQUIPMENT & SUPPLIES - 0.1% Alliance Unichem PLC 1,190 8,152 TOTAL HEALTH 667,164 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HOLDING COMPANIES - 0.9% Cookson Group PLC 8,876 $ 39,819 Hunting Group PLC 7,460 30,039 69,858 INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% ELECTRICAL EQUIPMENT - 0.5% Choride Group PLC 44,440 30,814 Staveley Industries PLC 3,650 7,623 38,437 INDUSTRIAL MACHINERY & EQUIPMENT - 0.9% Babcock International Group PLC (a) 21,710 24,303 Senior Engineering Group PLC 10,630 39,073 63,376 POLLUTION CONTROL - 0.1% Waste Recycling Group PLC 800 5,771 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 107,584 MEDIA & LEISURE - 7.3% BROADCASTING - 0.4% Scottish Media Group PLC 2,370 28,313 ENTERTAINMENT - 2.2% Clubhaus PLC (a) 23,700 34,450 Granada Group PLC 5,366 92,345 Wembley PLC 5,570 35,643 162,438 LODGING & GAMING - 1.5% Jarvis Hotels PLC 9,020 23,962 Ladbroke Group PLC Ord. 11,239 61,733 Millennium & Copthorne Hotels PLC 2,650 25,857 111,552 PUBLISHING - 2.5% Daily Mail & General Trust PLC Class A 800 33,884 EMAP PLC 2,300 46,767 Mirror Group Newspaper PLC 8,600 26,295 Pearson PLC 5,020 78,590 185,536 RESTAURANTS - 0.7% Allied Domecq PLC 4,800 49,322 TOTAL MEDIA & LEISURE 537,161 NONDURABLES - 12.1% BEVERAGES - 3.4% Greenalls Group PLC 4,160 33,571 Scottish & Newcastle Brewers PLC 10,450 158,012 Vaux Group PLC 13,000 59,079 250,662 FOODS - 3.6% Bernard Matthews 10,600 17,710 Hazlewood Foods PLC Ord. 11,450 36,348 Tomkins PLC Ord. 26,409 155,317 Unigate PLC 4,860 58,952 268,327 HOUSEHOLD PRODUCTS - 2.0% Mcbride PLC 10,070 32,809 Oriflame International SA 4,300 36,281 Scholl PLC 5,970 37,405 Yule Catto Ord. 6,800 43,514 150,009 SHARES VALUE (NOTE 1) TOBACCO - 3.1% BAT Industries PLC Ord. 15,153 $ 142,791 Gallaher Group PLC 16,410 85,544 228,335 TOTAL NONDURABLES 897,333 RETAIL & WHOLESALE - 7.0% APPAREL STORES - 0.9% Arcadia Group PLC 6,300 49,486 Headlam Sims and Coggins PLC Class L 3,290 20,682 70,168 GROCERY STORES - 3.7% Albert Fisher Group PLC Ord. 62,400 29,192 Asda Group PLC 31,430 105,158 Geest PLC 3,150 26,762 Iceland Group PLC 8,400 31,227 Safeway PLC 8,700 51,821 Somerfield PLC 5,190 29,338 273,498 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% Great Universal Stores PLC Ord. Class A 7,660 116,593 Wickes PLC 5,070 29,818 146,411 TRADING COMPANIES - 0.4% Inchcape PLC Ord. 7,860 29,384 TOTAL RETAIL & WHOLESALE 519,461 SERVICES - 3.8% ADVERTISING - 0.2% Abbott Mead Vickers PLC 2,250 13,985 PRINTING - 0.7% Jarvis Porter Group PLC 6,170 22,370 Waddington PLC 7,220 32,209 54,579 SERVICES - 2.9% Davis Service Group 2,740 18,861 Go-Ahead Group (The) PLC 3,000 32,781 Halma PLC Ord. 19,600 42,736 Hays PLC 4,430 75,090 Securicor Group PLC 6,300 41,683 211,151 TOTAL SERVICES 279,715 TECHNOLOGY - 1.3% COMPUTER SERVICES & SOFTWARE - 0.4% Micro Focus Group (a) 3,250 29,594 COMPUTERS & OFFICE EQUIPMENT - 0.7% Skillgroup PLC 6,600 30,104 Psion PLC 4,320 19,921 50,025 ELECTRONICS - 0.2% Roxboro Group PLC 4,000 18,579 TOTAL TECHNOLOGY 98,198 TRANSPORTATION - 3.8% AIR TRANSPORTATION - 1.1% BAA PLC Ord. 8,100 82,351 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TRANSPORTATION - CONTINUED SHIPPING - 2.7% Peninsular & Oriental Steam Navigation Co. 9,679 $ 142,715 Powell Duffryn PLC 6,100 55,546 198,261 TOTAL TRANSPORTATION 280,612 UTILITIES - 8.5% CELLULAR - 2.9% Vodafone Group PLC 19,785 216,522 ELECTRIC UTILITY - 2.0% British Energy PLC 4,960 45,166 National Grid Co. PLC 16,133 104,046 149,212 GAS - 0.5% BG PLC 6,100 32,563 TELEPHONE SERVICES - 2.0% Cable & Wireless Communications PLC (a) 5,980 43,413 Cable & Wireless Communications PLC Ord. 9,360 107,125 150,538 WATER - 1.1% Hyder PLC 5,130 82,455 TOTAL UTILITIES 631,290 TOTAL COMMON STOCKS (Cost $6,157,599) 7,245,413 CASH EQUIVALENTS - 2.2% Taxable Central Cash Fund (b) (Cost $164,138) 164,138 164,138 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $6,321,737) $ 7,409,551 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.51%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $6,062,576 and $5,389,298, respectively. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,444,000 and $961,875, respectively. The weighted average interest rate was 5.8%. (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At April 30, 1998, the aggregate cost of investment securities for income tax purposes was $6,322,254. Net unrealized appreciation aggregated $1,087,297, of which $1,223,584 related to appreciated investment securities and $136,287 related to depreciated investment securities. UNITED KINGDOM FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE $ 7,409,551 (COST $6,321,737) - SEE ACCOMPANYING SCHEDULE FOREIGN CURRENCY HELD AT VALUE 55,432 (COST $55,424) RECEIVABLE FOR INVESTMENTS SOLD 88,269 RECEIVABLE FOR FUND SHARES SOLD 17,820 DIVIDENDS RECEIVABLE 65,221 INTEREST RECEIVABLE 1,245 RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 4,847 TOTAL ASSETS 7,642,385 LIABILITIES PAYABLE TO CUSTODIAN BANK $ 4,101 PAYABLE FOR INVESTMENTS PURCHASED 157,046 OTHER PAYABLES AND 44,129 ACCRUED EXPENSES TOTAL LIABILITIES 205,276 NET ASSETS $ 7,437,109 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 5,675,522 UNDISTRIBUTED NET INVESTMENT INCOME 36,840 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 636,290 NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,088,457 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 468,305 $ 7,437,109 SHARES OUTSTANDING NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($7,437,109 (DIVIDED BY) 468,305 SHARES) $15.88 MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $15.88) $16.37
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 127,674 DIVIDENDS INTEREST 11,731 139,405 LESS FOREIGN TAXES WITHHELD (12,911) TOTAL INCOME 126,494 EXPENSES MANAGEMENT FEE $ 26,509 TRANSFER AGENT FEES 10,965 ACCOUNTING FEES AND EXPENSES 30,020 NON-INTERESTED TRUSTEES' COMPENSATION 13 CUSTODIAN FEES AND EXPENSES 40,234 REGISTRATION FEES 6,830 AUDIT 13,481 LEGAL 18 INTEREST 1,231 REPORTS TO SHAREHOLDERS 2,228 TOTAL EXPENSES BEFORE REDUCTIONS 131,529 EXPENSE REDUCTIONS (60,349) 71,180 NET INVESTMENT INCOME 55,314 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 643,752 FOREIGN CURRENCY TRANSACTIONS (946) 642,806 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 529,140 ASSETS AND LIABILITIES IN (608) 528,532 FOREIGN CURRENCIES NET GAIN (LOSS) 1,171,338 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,226,652 OTHER INFORMATION $ 6,371 SALES CHARGES PAID TO FDC SALES CHARGES - DEALERS' PORTION $ 750 EXPENSE REDUCTIONS $ 60,349 FMR REIMBURSEMENTS
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED APRIL 30, 1998 OCTOBER 31, (UNAUDITED) 1997 OPERATIONS $ 55,314 $ 120,593 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 642,806 580,520 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 528,532 249,896 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,226,652 951,009 DISTRIBUTIONS TO SHAREHOLDERS (115,006) (35,705) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (484,235) (54,931) TOTAL DISTRIBUTIONS (599,241) (90,636) SHARE TRANSACTIONS 4,305,224 5,571,480 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 598,563 90,558 COST OF SHARES REDEEMED (3,845,730) (3,481,394) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,058,057 2,180,644 REDEMPTION FEES 42,779 12,334 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,728,247 3,053,351 NET ASSETS BEGINNING OF PERIOD 5,708,862 2,655,511 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $36,840 AND $115,342, RESPECTIVELY) $ 7,437,109 $ 5,708,862 OTHER INFORMATION SHARES SOLD 297,979 437,185 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 43,658 7,700 REDEEMED (274,948) (266,573) NET INCREASE (DECREASE) 66,689 178,312
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED NOVEMBER 1, 1995 APRIL 30, 1998 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1997 1996 NET ASSET VALUE, BEGINNING OF PERIOD $ 14.21 $ 11.89 $ 10.00 INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .11 D .31 D .16 NET REALIZED AND UNREALIZED GAIN (LOSS) 2.46 2.31 1.75 TOTAL FROM INVESTMENT OPERATIONS 2.57 2.62 1.91 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.19) (.13) (.04) FROM NET REALIZED GAIN (.80) (.20) - TOTAL DISTRIBUTIONS (.99) (.33) (.04) REDEMPTION FEES ADDED TO PAID IN CAPITAL .09 .03 .02 NET ASSET VALUE, END OF PERIOD $ 15.88 $ 14.21 $ 11.89 TOTAL RETURN B, C 19.82% 22.87% 19.38% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF PERIOD (000 OMITTED) $ 7,437 $ 5,709 $ 2,656 RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.04% A, E 2.00% E 2.00% E RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 2.04% A 1.99% F 1.97% F RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.58% A 2.36% 1.62% PORTFOLIO TURNOVER RATE 160% A 96% 50% AVERAGE COMMISSION RATE G $ .0094 $ .0105 $ .0086 A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED APRIL 30, 1998 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Canada Fund, Fidelity Emerging Markets Fund, Fidelity Europe Fund, Fidelity Europe Capital Appreciation Fund, Fidelity France Fund, Fidelity Germany Fund, Fidelity Hong Kong and China Fund, Fidelity Japan Fund, Fidelity Japan Small Companies Fund, Fidelity Latin America Fund, Fidelity Nordic Fund, Fidelity Pacific Basin Fund, Fidelity Southeast Asia Fund and Fidelity United Kingdom Fund (the funds) are funds of Fidelity Investment Trust (the trust). The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Each fund is authorized to issue an unlimited number of shares. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION. Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. If trading or events occurring in other markets after the close of the principal market in which securities are traded is expected to materially affect the value of those securities, then they are valued at their fair value taking this trading or these events into account. Fair value is determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Equity securities that have reached the limit for aggregate foreign ownership may trade at a premium to the local share price. If the broker-quoted premium is not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which securities are normally traded. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchase and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade date and settlement on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. Each fund may be subject to foreign taxes on income and gains on investments which are accrued based upon each fund's understanding of the tax rules and regulations that exist in the markets in which they invest. Each fund accrues such taxes as applicable. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Certain foreign currency gains (losses), if applicable, are taxable as ordinary income and, therefore, increase (decrease) taxable ordinary income available for distribution. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, futures and options transactions, foreign currency transactions, passive foreign investment companies (PFIC), non-taxable dividends, net operating losses, capital loss carryforwards and losses deferred due to wash sales, futures and options and excise tax regulations. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income, accumulated net investment loss, distributions in excess of net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in Canada, Emerging Markets, France, Germany, Hong Kong and China, Japan, Japan Small Companies, Latin America, Nordic, Southeast Asia and United Kingdom less than 90 days are subject to a short-term trading fee equal to 1.50% of the proceeds of the redeemed shares. Shares held in Europe, Europe Capital Appreciation, and Pacific Basin less than 90 days are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. These fees, which are retained by the funds, are accounted for as an addition to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the funds, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the funds, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the funds' investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the funds may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc., (formerly FMR Texas, Inc.) an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the funds are recorded as interest income in the accompanying financial statements. FUTURES CONTRACTS. Certain funds may use futures contracts to manage their exposure to the stock market and to fluctuations in currency values. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in each applicable fund's Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in each applicable fund's schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. RESTRICTED SECURITIES. Certain funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 3. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities), and the market value of future contracts opened and closed, is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .45%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The basic fee for Canada, Europe, Europe Capital Appreciation, Japan, Pacific Basin, and Southeast Asia is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on each fund's investment performance as compared to the appropriate index over a specified period of time. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED For the period, each fund's management fee was equivalent to the following annualized rates expressed as a percentage of average net assets after the performance adjustment, if applicable: Canada .31% Emerging Markets .76% Europe .80% Europe Capital Appreciation .76% France .75% Germany .76% Hong Kong and China .76% Japan 1.03% Japan Small Companies .76% Latin America .76% Nordic .75% Pacific Basin 1.09% Southeast Asia 1.15% United Kingdom .76% SUB-ADVISER FEE. FMR, on behalf of the funds, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Far East) Inc., Fidelity International Investment Advisors (FIIA), and Fidelity Investments Japan Limited (FIJ) (Hong Kong and China, Japan, Emerging Markets, Pacific Basin, Japan Small Companies and Southeast Asia funds only.). In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIA(U.K.)L). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIA (U.K.) L a fee based on costs incurred for either service. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the fund. FDC receives a sales charge of up to 3.00% for selling shares of each fund. Shares of Canada, Europe, and Pacific Basin purchased prior to October 12, 1990, are subject to a 1% deferred sales charge upon redemption. The amounts received by FDC for sales charges, a portion of which was paid to securities dealers, banks and other financial institutions ("Dealers' Portion"), and deferred sales charges are shown under the caption "Other Information" on each fund's Statement of Operations. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, each fund's transfer agent fees were equivalent to the following annualized rates expressed as a percentage of average net assets: Canada .35% Emerging Markets .50% Europe .25% Europe Capital Appreciation .24% France .35% Germany .32% Hong Kong and China .39% Japan .33% Japan Small Companies .31% Latin America .29% Nordic .38% Pacific Basin .47% Southeast Asia .42% United Kingdom .31% ACCOUNTING FEES. FSC maintains each fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments 5. BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, each fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. Information regarding a fund's participation in the program is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 6. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse certain fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above an annual rate of 2.00% of average net assets. FMR has directed certain portfolio trades to brokers who paid a portion of certain fund's expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of each applicable fund's expenses. 6. EXPENSE REDUCTIONS - CONTINUED For the period, the reductions under these arrangements are shown under the caption "Other Information" on each applicable fund's Statement of Operations. 7. BENEFICIAL INTEREST. At the end of the period, FMR and its affiliates were record owners of approximately 5% of the total outstanding shares of the fund. FMR FUND % OF OWNERSHIP France 22 Germany 10 Japan Small Companies 40 United Kingdom 24 8. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company which the fund has ownership of at least 5% of the voting securities. Information regarding transactions with affiliated companies is included in "Other Information" at the end of each applicable fund's schedule of investments. 9. LITIGATION. The Latin America Fund is engaged in litigation against the obligor on the inflation adjusted debt of Siderurgica Brasileiras SA, contesting the calculation of the principal adjustment. The probability of success of this litigation cannot be predicted and the amount of recovery cannot be estimated. Any recovery from this litigation would inure to the benefit of the fund. As of period end, the Latin America Fund no longer holds Siderurgica Brasileiras SA debt securities. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. For quotes.* For account balances and holdings. To review orders and mutual fund activity. To change your PIN. To speak to a Fidelity representative. 0 * BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP61 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 815 East Birch Street Brea, CA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 950 Northgate Drive San Rafael, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Ave. Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 48 West Putnam Avenue Greenwich, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. 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Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 16850 SW 72 Avenue Tigard, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 6150 Poplar Road Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 4017 Northwest Parkway Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan Fidelity Investments Japan Ltd. Fidelity International Investment Advisors Fidelity International Investment Advisors (U.K.) Limited OFFICERS Edward C. Johnson 3d, PRESIDENT Robert C. Pozen, SENIOR VICE PRESIDENT Richard A. Spillane, Jr., VICE PRESIDENT Allan Liu, VICE PRESIDENT, SOUTHEAST ASIA FUND Shigeki Makino, VICE PRESIDENT, JAPAN FUND, PACIFIC BASIN FUND Kevin McCarey, VICE PRESIDENT, EUROPE CAPITAL APPRECIATION FUND Patricia Satterthwaite, VICE PRESIDENT, LATIN AMERICA FUND Thomas Sweeney, VICE PRESIDENT, CANADA FUND Sally Walden, VICE PRESIDENT, EUROPE FUND Eric D. Roiter, SECRETARY Richard A. Silver, TREASURER John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CUSTODIANS The Chase Manhattan Bank New York, NY EMERGING MARKETS FUND, EUROPE FUND, EUROPE CAPITAL APPRECIATION FUND, JAPAN FUND, PACIFIC BASIN FUND, SOUTHEAST ASIA FUND Brown Brothers Harriman & Co. Boston, MA CANADA FUND, FRANCE FUND, GERMANY FUND, HONG KONG AND CHINA FUND, JAPAN SMALL COMPANIES FUND, LATIN AMERICA FUND, NORDIC FUND, UNITED KINGDOM FUND FIDELITY'S INTERNATIONAL EQUITY FUNDS Canada Fund Diversified International Fund Emerging Markets Fund Europe Fund Europe Capital Appreciation Fund France Fund Germany Fund Hong Kong and China Fund International Growth and Income Fund International Value Fund Japan Fund Japan Small Companies Fund Latin America Fund Nordic Fund Overseas Fund Pacific Basin Fund Southeast Asia Fund United Kingdom Fund Worldwide Fund CORPORATE HEADQUARTERS 82 Devonshire Street Boston, MA 02109 1-800-544-8888 THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE BULK RATE U.S. POSTAGE P A I D F I D E L I T Y INVESTMENTS (registered trademark) P.O. Box 193 Boston, MA 02101 -----END PRIVACY-ENHANCED MESSAGE-----